[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]




                               BEFORE THE


                                 OF THE

                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION


                            OCTOBER 13, 2011


                           Serial No. 112-96

      Printed for the use of the Committee on Energy and Commerce


74-605                    WASHINGTON : 2012
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                          FRED UPTON, Michigan

JOE BARTON, Texas                    HENRY A. WAXMAN, California
  Chairman Emeritus                    Ranking Member
CLIFF STEARNS, Florida               JOHN D. DINGELL, Michigan
ED WHITFIELD, Kentucky                 Chairman Emeritus
JOHN SHIMKUS, Illinois               EDWARD J. MARKEY, Massachusetts
JOSEPH R. PITTS, Pennsylvania        EDOLPHUS TOWNS, New York
MARY BONO MACK, California           FRANK PALLONE, Jr., New Jersey
GREG WALDEN, Oregon                  BOBBY L. RUSH, Illinois
LEE TERRY, Nebraska                  ANNA G. ESHOO, California
MIKE ROGERS, Michigan                ELIOT L. ENGEL, New York
  Vice Chairman                      DIANA DeGETTE, Colorado
JOHN SULLIVAN, Oklahoma              LOIS CAPPS, California
TIM MURPHY, Pennsylvania             MICHAEL F. DOYLE, Pennsylvania
BRIAN P. BILBRAY, California         JAY INSLEE, Washington
CHARLES F. BASS, New Hampshire       TAMMY BALDWIN, Wisconsin
PHIL GINGREY, Georgia                MIKE ROSS, Arkansas
STEVE SCALISE, Louisiana             JIM MATHESON, Utah
ROBERT E. LATTA, Ohio                G.K. BUTTERFIELD, North Carolina
GREGG HARPER, Mississippi            DORIS O. MATSUI, California
LEONARD LANCE, New Jersey            DONNA M. CHRISTENSEN, Virgin 
BILL CASSIDY, Louisiana              Islands
BRETT GUTHRIE, Kentucky              KATHY CASTOR, Florida
DAVID B. McKINLEY, West Virginia


           Subcommittee on Commerce, Manufacturing, and Trade

                       MARY BONO MACK, California
MARSHA BLACKBURN, Tennessee          G.K. BUTTERFIELD, North Carolina
  Vice Chairman                        Ranking Member
CLIFF STEARNS, Florida               CHARLES A. GONZALEZ, Texas
CHARLES F. BASS, New Hampshire       JIM MATHESON, Utah
GREGG HARPER, Mississippi            JOHN D. DINGELL, Michigan
LEONARD LANCE, New Jersey            EDOLPHUS TOWNS, New York
BILL CASSIDY, Louisiana              BOBBY L. RUSH, Illinois
BRETT GUTHRIE, Kentucky              JANICE D. SCHAKOWSKY, Illinois
PETE OLSON, Texas                    MIKE ROSS, Arkansas
DAVID B. McKINLEY, West Virginia     HENRY A. WAXMAN, California (ex 
MIKE POMPEO, Kansas                      officio)
FRED UPTON, Michigan (ex officio)


                             C O N T E N T S

Hon. Mary Bono Mack, a Representative in Congress from the State 
  of California, opening statement...............................     1
    Prepared statement...........................................     4
Hon. G.K. Butterfield, a Representative in Congress from the 
  State of North Carolina, opening statement.....................     6
Hon. Marsha Blackburn, a Representative in Congress from the 
  State of Tennessee, opening statement..........................     7
    Prepared statement...........................................     9
Hon. Joe Barton, a Representative in Congress from the State of 
  Texas, opening statement.......................................    10
    Prepared statement...........................................    11
Hon. Pete Olson, a Representative in Congress from the State of 
  Texas, opening statement.......................................    13
Hon. Cliff Stearns, a Representative in Congress from the State 
  of Florida, prepared statement.................................   190
Hon. Henry A. Waxman, a Representative in Congress from the State 
  of California, prepared statement..............................   191
Hon. John D. Dingell, a Representative in Congress from the State 
  of Michigan, prepared statement................................   196


Barbara Lawler, Chief Privacy Officer, Intuit....................    14
    Prepared statement...........................................    16
    Answers to submitted questions...............................   201
Mike Hintze, Associate General Counsel, Microsoft Corporation....    30
    Prepared statement...........................................    32
    Answers to submitted questions...............................   203
Scott Meyer, CEO, Evidon.........................................    56
    Prepared statement...........................................    58
    Answers to submitted questions...............................   206
Linda Woolley, Executive Vice President, Washington Operations, 
  Direct Marketing Association, on behalf of Digital Advertising 
  Alliance.......................................................    75
    Prepared statement...........................................    77
    Answers to submitted questions...............................   209
Allessandro Acquisti, Associate Professor of Information 
  Technology and Public Policy, Heinz College, Carnegie Mellon 
  University.....................................................    97
    Prepared statement...........................................    99
    Answers to submitted questions...............................   214
Pam Dixon, Executive Director, World Privacy Forum...............   112
    Prepared statement...........................................   114

                           Submitted Material

Majority memorandum, dated October 13, 2011, submitted by Mrs. 
  Bono Mack......................................................   197



                       THURSDAY, OCTOBER 13, 2011

                  House of Representatives,
Subcommittee on Commerce, Manufacturing, and Trade,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 9:06 a.m., in 
room 2123, Rayburn House Office Building, Hon. Mary Bono Mack 
(chairman of the subcommittee) presiding.
    Members present: Representatives Bono Mack, Blackburn, 
Stearns, Bass, Harper, Lance, Cassidy, Guthrie, Olson, Pompeo, 
Kinzinger, Barton, Butterfield, Gonzalez, Matheson, Dingell, 
and Towns.
    Staff present: Jim Barnette, General Counsel; Brian 
McCullough, Senior Professional Staff Member, CMT; Jeff 
Mortier, Professional Staff Member; Gib Mullan, Chief Counsel, 
CMT; Andrew Powaleny, Press Assistant; Brett Scott, Staff 
Assistant; Shannon Weinberg, Counsel, CMT; Tom Wilbur, Staff 
Assistant; Alex Yergin, Legislative Clerk; Michelle Ash, 
Democratic Chief Counsel; Felipe Mendoza, Democratic Counsel; 
and Will Wallace, Democratic Policy Analyst.
    Mrs. Bono Mack. The subcommittee will now come to order. 
That makes it quiet down real quick.
    This is the fourth in our ongoing series of hearings on 
online privacy. When our work is finally finished, my goal is 
to point to a better way to protect consumer privacy and to 
promote e-commerce at the same time. In the end, this will 
benefit both American consumers and American businesses and 
preserve a strongly held belief all across our Nation and 
around the world that the Internet should remain free.
    The chair will now recognize herself for an opening 


    When it comes to online privacy, at least for me, consumer 
attitudes and expectations are the bits and the bytes that 
matter the most. Do Americans really believe enough is being 
done today to protect their online privacy? Are they taking 
advantage of the many privacy tools currently available to 
them? Do they even know about these tools? If not, why not? And 
do these privacy features--for the most part--really work? Or 
is it time for Congress to finally legislate in this area? This 
is a hearing that I have been looking forward to for a very 
long time because it is the first time we tried to quantify 
what consumers expect and want. This is where the rubber hits 
the road with respect to online privacy.
    Today, there is no single Federal law expressly governing 
all data collection in the United States. Instead, there is a 
confusing hodgepodge of more than 300 State and Federal laws. 
Likewise, there is no single regulator to enforce all these 
privacy-related laws. Rather, an industry-specific approach has 
emerged whereby Congress has restricted consumer data 
collection and use by subject matter and provided the 
enforcement authority to the relevant Federal agency.
    As it stands today, the Federal Trade Commission arguably 
has the broadest jurisdiction to enforce general privacy 
violations under its Section 5 authority defining unfair or 
deceptive acts or practices. Since 2001 the commission has 
brought 34 cases against companies that failed to protect 
consumer information, including when companies fail to adhere 
to their own stated privacy policy.
    In recent years, both policymakers and stakeholders have 
expressed increasing concerns regarding the collection and 
availability of consumers' personal information online. 
Increased data collection and storage by Web sites, information 
brokers, direct marketers, ISPs, and advertisers have been 
driven in large part by the rapid decline of the associated 
costs of data processing and storage, while at the same time 
the value of consumer information has increased significantly.
    As we know, data about consumers' online behavior is being 
used today to target ads, increasing the likelihood of a sale 
of a particular product. Is this bad? Not necessarily. But is 
this process transparent enough and do consumers have enough 
information and tools available to them to be able to opt out 
of having their data collected and shared with unknown parties 
if they so choose? In many ways, this is the very root of the 
privacy issue.
    In response to growing concerns over online data collection 
and use--particularly regarding behavioral advertising--the 
online advertising community developed a self-regulatory model 
to provide consumers with notice and choice about 
advertisements delivered to them through behavioral targeting.
    The Digital Advertising Alliance developed and implemented 
these so-called ``about ads'' to provide consumers more 
information on why they are seeing a particular ad and to 
provide them a mechanism to opt out of future ads directed at 
them based on behavioral advertising.
    Later, the FTC took things a step further, proposing a 
number of principles to enhance consumer choices regarding 
privacy, including the concept of a ``do not track'' mechanism.
    Since the hearing in the last Congress on ``do not track'' 
legislation, the two most popular browser developers--
Microsoft's Internet Explorer and Mozilla's Firefox--have both 
designed and incorporated a ``do not track'' feature into their 
    These features are user-controlled, so consumers must 
choose to turn them on to actually prevent tracking. Internet 
Explorer blocks content from sites that are on tracking 
protection lists and that could otherwise use the content to 
collect information. Mozilla's Firefox broadcasts its signal to 
each Web site a consumer actually visits, communicating the 
consumer's desire not to have his or her information collected.
    Clearly, the effectiveness of Mozilla's approach faces 
significant hurdles because every Web site that receives a 
signal from the consumer's browser must choose to honor their 
request, and currently there is no requirement that Web sites 
must do so.
    So what do consumers think about all of this? And when it 
comes to the Internet, how do we--as Congress and as 
Americans--balance the need to remain innovative with the need 
to protect privacy?
    Clearly, the explosive growth of technology has made it 
possible to collect information about consumers in increasingly 
sophisticated ways. Sometimes the collection and use of this 
information is extremely beneficial; other times, it is not.
    Despite everything that I have heard in our previous 
hearings, I still remain somewhat skeptical right now of both 
industry and government. Frankly, I don't believe industry has 
proven that it is doing enough to protect American consumers, 
while government, unfortunately, tends to overreach whenever it 
comes to new regulations.
    That is why I am so anxious today to hit the ``refresh 
key'' to learn the latest about consumer attitudes and 
    And with that, I am happy to recognize the gentleman from 
North Carolina, Mr. Butterfield, for his opening statement for 
5 minutes.
    [The prepared statement of Mrs. Bono Mack follows:]

    [GRAPHIC] [TIFF OMITTED] T4605.001
    [GRAPHIC] [TIFF OMITTED] T4605.002

    Mr. Butterfield. Let me thank you, Chairman Bono Mack, for 
holding this very important hearing today.
    This is no doubt a very important issue to all of us. You 
spoke with me when we first started this subcommittee at the 
beginning of the session, and you told me of your keen interest 
in this issue, and I want to thank you for pursuing this 
hearing today.
    This forum provides an opportunity to look at expectations 
and attitudes about privacy from a consumer's point of view, 
and these witnesses that we have today, all six of them, will 
no doubt share with us some very valuable perspectives.
    The bottom line is that consumers want and expect privacy. 
Whether they are online, hopping from one Web site to another, 
or buying a few things at a chain grocery store, but sometimes, 
the privacy consumers expect isn't respected. For example, the 
information collection practices by online tracking firms for 
purposes of behavioral advertising aren't generally visible to 
consumers, and with those consumers that know it is happening 
don't always know how to achieve the level of privacy they want 
with the tools available to them.
    I understand that online advertising is big business. We 
all know that. Last year revenue from all types of online and 
advertising totaled $26 billion. This revenue helps to support 
free access to a lot of the online content consumers have come 
to expect. A small but growing segment of this revenue is 
coming from behavioral advertising, and I think most of us by 
now understand how that works, but let me nonetheless try to 
describe it in my own way.
    Imagine that I am in the market for a new car, let's say a 
Ford Explorer. Since I drive a 2000 Ford Explorer, let's say I 
am in the market for another Ford Explorer. I visit some online 
car comparison Web sites, and there are many. I visit the 
manufacturer's Web site, and then I decide to put off buying a 
car for another day or two. I go to the Web site of a daily 
newspaper, and all of a sudden there are advertisements on some 
of the pages for, you guessed it, a Ford Explorer.
    This happens through the installation of cookies on my 
computer, although some of the industry have resorted to more 
persistent and less visible tracking tools. Those cookies allow 
an advertiser to track my online activities across multiple Web 
sites and ultimately serve me up a tailored advertisement for a 
vehicle that I had previously expressed an interest.
    I appreciate the amazing business opportunities made 
possible by behavioral advertising. I understand that consumers 
are probably more likely to purchase goods and services after 
seeing an advertisement if it is relevant to their likes and 
    However, a leading academic study of consumer attitudes 
toward behavioral advertising found they don't want it. That 
study found that 66 percent of survey participants did not want 
tailored advertising. The number that didn't want tailored 
advertising jumped to 84 percent when participants were asked 
if it would be OK to base that tailoring off of tracking a 
consumer's activities across Web sites. The number jumped to 86 
percent when participants were asked if it would be OK to base 
tailored advertising on offline activities, like using a 
discount card at the grocery store.
    One thing is clear, consumers aren't clamoring for tailored 
advertising, and they become more uncomfortable with it when 
asked about the sorts of tracking activities that enable it. 
The finding of another study on consumer attitudes sums it up 
best: 64 percent of participants agreed that someone keeping 
track of my activities online is invasive, while only 4 percent 
    I will be clear. I support the online advertising industry, 
I have told them that, and respect the central role that ads 
play in supporting a free Internet ecosystem. However, I 
strongly believe that consumers have the right to know upfront 
when their online activities are being tracked, what activities 
are being tracked, and what that information will be used for 
as well as the option to opt out of having their information 
collected entirely, not just from receiving targeted ads.
    The online advertising industry has responded to privacy 
concerns by creating a self-regulatory program for behavioral 
advertising that provides consumers with Web sites that allow 
them to opt out from receiving behavioral advertising from 
companies, from participating companies. I appreciate this 
    I still feel strongly that a national baseline privacy law 
is the best way to ensure consumers have basic common sense and 
permanent rights over the collection and use of their 
    Again, thank you, Madam Chair. I yield back.
    Mrs. Bono Mack. I thank the gentleman.
    And the chair recognizes the gentlelady from Tennessee, Ms. 
Blackburn, for 5 minutes.


    Mrs. Blackburn. Thank you, Madam Chairman.
    I want to welcome all of our witnesses here today. We are 
delighted to have you here to participate in this discussion, 
and as we talk about tech policy and the virtual marketplace 
today, we are talking about government regulating the use of 
data and what that interface is going to be.
    As we worked through this issue, as the chairwoman said, 
this is our fourth hearing on this, I have decided that this 
data should be treated as a natural resource and that the DNA 
of this data is very powerful. It really is the lifeblood of a 
thriving Internet economy.
    So here are some questions for you. Should we allow our 
free market to explore this natural resource and learn to 
commercialize it, protect it, and respect it, or are we going 
to restrict it altogether? Why should government be the 
decision-maker? Government seems to know so little. It reacts 
slowly, works poorly, and I was reading a quote from one of my 
favorite economists, F. A. Hayek, Friedrich Hayek, who wrote 
the book, ``Road to Serfdom,'' and as I had to remind a college 
student recently, that is s-e-r-f-d-o-m, not s-u-r-f-d-o-m. Let 
me give you this quote: It is the curious task of economics is 
to demonstrate to men how little they really know about what 
they imagine they can design, end quote. I think that is very 
relevant to this discussion that we are having about privacy in 
the virtual marketplace.
    We don't know what consumers' true expectations are about 
online privacy. Consumers are different. Their expectations are 
not static, whether they are 2 or 20 or 82, and innovation 
moves 500 times faster than what we see government moving. And 
we don't need to pretend that government has all the answers.
    Our thriving tech and ad industries are infinitely more 
responsive and better equipped to meet consumer needs than a 
Federal Government program that is one size fits all.
    In my opinion, our foundation for policy should be 
flexible, encourage beneficial use of data, protect against 
real harms, empower people instead of government.
    I look forward to your testimony.
    And at this time, I yield to Mr. Barton of Texas.
    [The prepared statement of Mrs. Blackburn follows:]

    [GRAPHIC] [TIFF OMITTED] T4605.003

    Mr. Barton. Thank you, Ms. Blackburn.
    I am going to read the Third Amendment to the Constitution 
of the United States. It says, no soldier shall in time of 
peace be quartered in any house without the consent of the 
owner nor in time of war but in a manner to be prescribed by 
law. That is the Third Amendment to the Bill of Rights of the 
Constitution. If the Founding Fathers had had the Internet, 
instead of saying without the consent of the owner to put 
soldiers in your home, they would have said without the consent 
of the Internet user, they couldn't collect data.
    I want to put my support to what the ranking member, Mr. 
Butterfield, just said. I think it is time that the Congress of 
the United States pass a strong, general, explicit privacy 
protection law. We have approached the use of the Internet more 
from a marketing standpoint, that apparently each of us that 
uses the Internet individually exists to primarily be marketed 
and not as individuals that have guaranteed rights under the 
    Now, the Constitution does not explicitly guarantee the 
right to privacy, but they wouldn't have put the Third 
Amendment about putting soldiers in your home without your 
consent if they didn't at least implicitly understand that 
every person in the United States at that time had the right to 
    Every week, Madam Chairwoman, we hear some other additional 
outrage about the abuse of the Internet, whether it is a super 
cookie that somebody can put on your computer without your 
knowledge and you can't get it off. Now, my staff yesterday 
told me that one of our leading Internet companies, Amazon, is 
going to create their own server in their own system, and they 
are going to force everybody that uses Amazon to go through 
their server, and they are going to collect all this 
information on each person who does that without that person's 
    I mean, enough is enough, Madam Chairwoman.
    We have over 240 million Americans who use the Internet 
every day. Each of those 240 million Americans are entitled, in 
my opinion, to the right to privacy.
    With that, I want to yield the balance of the time to Mr. 
Olson of Texas.
    [The prepared statement of Mr. Barton follows:]

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    Mr. Olson. I thank my colleague, the chairman emeritus from 
    I thank the chairwoman.
    As we continue our hearings on online privacy issues, we 
need to ask ourselves two fundamental questions: Number one, 
when it comes to privacy protections in the online space, is 
there an issue industry can't correct on their own through 
self-regulatory initiatives? And, number two, if there is a 
problem industry can't correct without negatively impacting 
jobs, our struggling economy, and the growth and innovation we 
are seeing in the online space, can the government correct 
these problems?
    Today's hearing is important because we will hear directly 
from industry about what they are doing on their own to better 
provide transparency and privacy for customers online. One key 
advantage industry has over government is the ability to 
quickly adapt to changes in consumer demands and changes in 
    So I thank the witnesses for being here and look forward to 
their testimony.
    Yield back.
    Mrs. Bono Mack. I thank the gentleman, and now we turn our 
attention to our panel.


    Mrs. Bono Mack. We have one panel of witnesses joining us 
today. Each of our witnesses has prepared an opening statement 
that will be placed into the record. Each of you will have 5 
minutes to summarize that statement in your remarks. A special 
welcome to the Californians on the panel, recognizing it is 
6:25 for your body clocks, we have a special appreciation for 
your appearance here today.
    But on our panel, first, we have Barbara Lawler, chief 
privacy officer at Intuit. Then we have Michael Hintze, 
associate general counsel at Microsoft. Then we have Scott 
Meyer, chief executive officer at Evidon. Our fourth witness is 
Linda Woolley, executive vice president of the Direct Marketing 
Association. Our fifth witness is Alessandro Acquisti, 
associate professor of information systems and public policy at 
Carnegie Mellon University. And our final witness is Pam Dixon, 
executive director at the World Privacy Forum.
    Good morning and thank you all again for coming. You will 
be recognized for 5 minutes. To keep track of the time, you 
have the timers in front of you, and green, yellow, red, self-
explanatory, but please try to wrap it up when you get to 
yellow so when it hits red, your 5 minutes is up.
    Ms. Lawler, if you could pull your microphone forward and 
turn it on, you are recognized for 5 minutes.


    Ms. Lawler. Good morning, Chairman Bono Mack, Ranking 
Member Butterfield, and members of the committee, thank you for 
this opportunity to comment on consumer expectations around 
privacy. I am Barb Lawler, the Chief Privacy Officer at Intuit. 
I ask that my full statement be put into the record due to the 
time constraints.
    Intuit is well positioned to comment on consumer 
expectations about privacy. Over 50 million customers entrust 
us with their most personal financial information. We have been 
committed to innovating and implementing the safest and most 
responsible ways to work with consumers' financial information 
for nearly 30 years. Understanding our customers' expectations 
about online privacy and earning their trust is a major 
priority at Intuit.
    Intuit recently undertook a comprehensive research program 
that examined our customers' expectations about privacy. Our 
customers told us they expect Intuit to be an ethical steward 
of their information, applying it reasonably and with integrity 
for their benefit, while keeping it safe and secure. Our 
research strongly informed the development of our data 
stewardship principles. The unifying concept is that it is the 
customer's data, not ours.
    Our principles provide our customers with tools to 
understand how their data is being used and empower them with 
choices to control the use of their data. These fundamentals 
were based on a number of key insights we learned from our 
customer research project.
    First, we learned that data privacy matters to consumers. 
While many people do not pore over privacy policy statements, 
they do care deeply about privacy and how their data is used. 
Customers told us the fine print is often confusing and they 
prefer simple, easy-to-read explanations of how their data will 
be applied and used and serviced to their needs.
    Second, we found that customers want clear, relevant, and 
context-based choices that educate and empower them to control 
the use of their data. When a choice is presented in relevant 
context and coupled with a simple explanation, most customers 
felt empowered to make choices and then welcomed the use of 
their data.
    Finally, confidence increases when consumers clearly 
understand how their data can be applied to benefit them.
    In the absence of clear statement and principles, customers 
can worry that their data will be sold to third parties to 
benefit someone else or possibly harm them. When data-driven 
benefits are clearly outlined to consumers in responsible ways, 
their attitudes toward the use of their data significantly 
    Data-driven innovations can equip individuals and small 
business owners with new tools and insights that once were only 
available to much larger and more powerful companies. Our 
research showed a tremendous appetite for such products and 
services amongst both consumers and small business owners. For 
example, Intuit developed capabilities for small business 
owners to compare themselves along key metrics for similarly 
situated businesses in the same geography. Imagine if your 
local florist could compare his regular spending trends, soil, 
marketing or delivery trucks, anonymously with those of other 
florists in his region of the country. This kind of service 
involves the use of the customer's own data in a way that 
brings meaningful value to their lives and financial well-
    As we move toward a connected services cloud-based economy, 
it is vital that we develop clear and practical privacy 
frameworks that answer the concerns and expectations of 
consumers, regardless of the technology or the device they 
choose to use. Data stewardship represents our ongoing 
commitment to act as an accountable organization to our 
customers and to the public. We see data stewardship as a clear 
and practical privacy policy framework for the 21st century. We 
all must work toward the shared goal of protecting consumers 
while maintaining data-driven innovation that improves 
consumers' lives in trusted, real, and fundamental ways.
    Thank you again for this opportunity. We look forward to 
working together with you and the committee toward this 
important goal.
    [The prepared statement of Ms. Lawler follows:]

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    Mrs. Bono Mack. Thank you, Ms. Lawler.
    Mr. Hintze, you are recognized for 5 minutes.


    Mr. Hintze. Chairman Bono Mack, Ranking Member Butterfield, 
and honorable members of the committee, my name is Mike Hintze, 
and I am an associate general counsel at Microsoft. Thank you 
for the opportunity to share Microsoft's perspective on the 
important issue of consumer attitudes about privacy. We 
appreciate the leadership the subcommittee has shown on this 
topic, and we are committed to working with you and others to 
protect consumer privacy while promoting innovation. The 
diverse products and services through which Microsoft engages 
with consumers gives us a unique perspective on the privacy 
    We have a strong commitment to privacy because we recognize 
that consumer trust is critical to the adoption of online 
services. Our goal at Microsoft is to build trust with 
consumers by providing them with information about what data is 
being collected and how it is being used, offering choices 
about the collection and use of that data and ensuring that 
their data is kept secure.
    In our experience, there is no ``silver bullet'' solution 
to privacy. This is because privacy means different things to 
different consumers, and there is a wide range of privacy 
sensitivities among individuals. Consumers also have different 
privacy expectations depending on the context in which their 
data is collected and used. Finally, as technology evolves, 
customer expectations about privacy often evolve with it. These 
challenges require a multifaceted approach to addressing 
consumer privacy. In our view, this approach should focus on 
four key elements.
    The first element is company best practices. At Microsoft, 
we have a deep and longstanding commitment to privacy in how we 
design our products and services and how we operate our 
business. We believe in adopting practices that provide 
consumers with information and choices to enable them to 
exercise more control over their privacy.
    Let me provide some examples of how consumers have 
responded to that approach. Over the past 5 months, key privacy 
Web sites offered by just one division of our company averaged 
over 2 million sessions per month. In an average month, more 
than 435,000 consumers access our advertisement choice Web 
site. This site provides information about personalized online 
advertisements and how consumers can opt out or use other 
controls. Approximately 20 percent of those consumers perform 
some action while visiting that site, in most cases opting out 
of personalized ads. As these numbers make clear, when we 
provide consumers with information and meaningful controls, 
many will use them.
    The second element is technology tools that empower users 
to protect themselves as they interact with other sites across 
the Internet. For example, we were the first major browser 
manufacturer to respond to the FTC's recent call for a 
persistent browser-based ``do not track'' mechanism. In 
Internet Explorer 9, we offer this feature which we call 
tracking protection. It allows consumers to decide which third-
party sites can receive their data and filters contents from 
sites identified as potential privacy threats.
    But no company can meet consumer privacy expectations on 
its own. So the third element that can contribute to the 
protection of consumer privacy involves baseline rules of the 
road established by both industry self-regulation and 
legislation. Industry self-regulation in particular plays an 
important role in fostering privacy solutions and can offer 
flexible approaches for protecting privacy in many different 
contexts. We also have long-supported Federal baseline privacy 
legislation as a means of setting rules that can protect 
consumers without hampering innovation.
    Nevertheless, self-regulatory efforts are generally better 
than prescriptive legislation to keep pace with evolving 
technologies. One recent example of this is the self-regulatory 
program for online behavioral advertising, which has advanced 
both transparency and consumer choice. Among other things, this 
program includes a standard icon that is prominently displayed 
in or next to online ads. By clicking on the icon, consumers 
can access information about the delivery of the ad and choose 
to opt out from receiving behavioral advertising.
    Finally, the fourth element is consumer education. In order 
for all of these elements to work, consumers need to understand 
the protections and tools available and the practices of 
companies with which they are interacting. That is why, in 
addition to providing information ourselves, we have also 
partnered with consumer advocates and government agencies to 
develop educational materials on consumer privacy and data 
    In conclusion, addressing consumer privacy expectations 
requires the collaborative effort of individual companies, 
industry groups, consumer and privacy advocates, government, 
and consumers themselves. We must work together to meet these 
challenges without hindering innovation.
    Thank you, and I look forward to answering your questions.
    [The prepared statement of Mr. Hintze follows:]

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    Mrs. Bono Mack. Thank you very much.
    Mr. Meyer, you are recognized for 5 minutes.

                    STATEMENT OF SCOTT MEYER

    Mr. Meyer. Thank you, Chairman Bono Mack, Ranking Member 
Butterfield, and distinguished members of the subcommittee.
    My name is Scott Meyer. I am the CEO and founder of Evidon. 
I appreciate the opportunity to appear before you today to talk 
about consumer expectations regarding online interest-based 
advertising and the important role that my company, Evidon, 
plays in meeting those expectations.
    We founded Evidon specifically to promote transparency, 
consumer control, and accountability across the online 
advertising ecosystem. Our technology is at the heart of the 
industry's self-regulatory program, which is designed to give 
consumers greater control, transparency, and understanding of 
interest-based or behavioral ads.
    The core component of the program is the display of a 
distinct advertising option icon on interest-based ads and on 
Web sites where data is collected and used. Our platform, which 
is called Evidon InForm, is a leading example of privacy by 
design in the actual real world. It displays the advertising 
option icon in ads and on Web pages. When consumers click on 
the icon, they can easily find out more information about the 
ad. This includes information about the companies who are 
involved in delivering the ad to them as well as the all-
important ability to opt out.
    I brought some slides with me today which are on the 
screens and are also in my written testimony, so if I could 
have the first slide, please, so you can see the platform in 
action. Here you can see an ad with the advertising option icon 
along with the text ad choices in the upper left-hand corner. 
You might also see the same icon in the bottom of a Web page.
    When consumers click on the icon, an overlay window appears 
with more information and the links you see displayed here on 
the next slide. In the 12 months since the launch of the 
advertising option icon program, Evidon has delivered over 85 
billion of these in-ad notices through our platform. We 
currently provide notice in nearly 20 billion online ads each 
month, and on an average day, ads with Evidon-powered notice 
reach more than 80 million U.S. Internet users.
    One click on the more information and opt-out options on 
the slide takes you to the next page, which is the Evidon Web 
page shown here. And on this page, consumers can see which 
companies have been able, which companies have been involved in 
the data collection and use, and they have the ability to find 
out more as well as, importantly, to opt out.
    Evidon InForm also provides reporting to the companies to 
show them how consumers have interacted with this platform, and 
those reports are endorsed as a standard method for providing 
evidence of compliance with the industry's self-regulatory 
    Though Evidon itself does not collect any consumer 
information, our anonymous logs show that the advertising 
option icon has been clicked 4.5 million times since the launch 
of the program. That has resulted in 730,000 opt-out requests 
being sent through the Evidon platform alone.
    In 2010, we commissioned a study by Millward Brown to 
better understand what consumers want and what they expect when 
they click on the icon. We found that 76 percent of consumers 
who clicked on the icon and interacted with the Evidon notice 
experience that you see here wanted to see all of the companies 
involved in targeting ads to them and find out more 
information. We also found that this was good for business, 
that 67 percent of consumers when they went through the Evidon 
notice experience felt more positive and in greater control of 
their advertising and felt more positive toward the brands that 
were involved in these ads. Together, these metrics support the 
proposition that consumers want more than a simple on or off 
switch, and they want substantive notice and control regarding 
the companies responsible for targeting the ads to them.
    Finally, if I could go to the next slide, in addition to 
implementing the advertising option icon, we have led the way 
with the creation of the Open Data Partnership. Open Data, a 
key feature is the preference manager you see here and in my 
written testimony which enables consumers to see and edit the 
information that companies have collected about them as well as 
the all-important ability to opt out.
    The metrics I have laid out today and more fully developed 
in my testimony reflect an order of magnitude shift in the 
availability of how information is used and collected and the 
choices that consumers are able to make. This is important 
because the information is no longer buried in privacy 
policies. Now it is presented to the consumer in clear, 
specific, and easily understood ways directly at the point of 
engagement. And ultimately, the success of this program should 
be judged by the degree to which these access tools are 
produced in a credible fashion and the extent to which these 
tools are offered to the consumer and not simply the rate at 
which consumers opt out.
    One last point I will make is that this hearing is all 
about consumer expectations. The one thing I think everyone 
here can agree on is that consumers have come to expect free 
online content. The targeted advertising that we are talking 
about today plays an essential role in supporting the vibrant, 
free, and open Internet that consumers have come to expect and 
to enjoy.
    Thank you again for inviting me to testify, and I look 
forward to answering your questions.
    [The prepared statement of Mr. Meyer follows:]

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    Mrs. Bono Mack. Thank you, Mr. Meyer.
    Ms. Woolley, you are recognized for 5 minutes, and please 
make sure your microphone is on and close to you.


    Ms. Woolley. Thank you, Madam Chairman.
    Ranking Member Butterfield and members of the committee, 
thank you for the opportunity to speak.
    My name is Linda Woolley, and I am Executive Vice President 
of Washington Operations for the Direct Marketing Association, 
a global trade association of thousands of businesses and 
nonprofit organizations that use and support multi-channel 
direct marketing tools and techniques.
    Today, however, I am pleased to testify on behalf of the 
Digital Advertising Alliance, known as DAA, and to report to 
the subcommittee on the substantial progress of our self-
regulatory program for online behavioral advertising. The 
program which you heard about from previous witnesses builds on 
a long tradition of successful self-regulation in marketing and 
advertising and provides transparency and controls so that 
consumers can exercise their individual choices regarding 
online behavioral advertising.
    It is appropriate that the subcommittee is devoting a 
series of hearings to online issues because it is impossible to 
overstate the economic importance of the Internet today. I 
think one of your members, I think Mr. Butterfield actually, 
mentioned earlier that the online behavioral advertising 
industry in this year alone represents a $30 billion economy, 
and that is growing.
    Advertising helps to fuel the Internet economic engine. 
According to a new report from the Direct Marketing 
Association, based on the results of the first half of this 
year, expenditures in 2011 on online marketing in the United 
States are expected to total over $30 billion. These revenues 
support e-commerce and subsidize a rich variety of content and 
services that consumers and businesses rely upon and value.
    Behavioral or interest-based advertising is an essential 
form of online advertising. It delivers content to consumers 
based on interests that are inferred from data about online 
activities. Consumers are likely to find interest-based 
advertisements much more relevant than the random messages that 
they would otherwise receive, and advertisers and publishers 
also derive great value from relevant advertising.
    In general, the data used for interest-based advertising is 
not personally identifiable, except when consumers choose to 
share personally identifiable information. Nevertheless, the 
advertising industry recognizes and respects that some 
consumers prefer not to receive such advertising.
    In 2009, as was already mentioned, the Federal Trade 
Commission endorsed industry self-regulation for online 
interest-based advertising. Following the road map that was set 
out by the Commission, the online advertising industry, on its 
own initiative, developed a self-regulatory principles for 
online behavioral advertising that cover consumer education, 
enhanced notice of data practices, innovative mechanisms, 
choice mechanisms, data security, sensitive data protection, 
consent for retroactive material changes, and enforcement.
    Our self-regulatory principles are comprehensive, but yet 
they are flexible enough to respond to the complex and ever-
evolving online advertising ecosystem. More importantly, they 
represent consensus in the online advertising community and are 
supported by all of the major industry stakeholders in the 
Internet ecosystem, as my colleague from Microsoft previously 
    Since publishing the principles, the advertising industry 
has put its money where its mouth is and developed a program 
that is second to none. Hundreds of companies have invested now 
millions of dollars to give consumers transparency about online 
data collection practices and meaningful choices about how data 
is collected and used.
    I want to mention that the DAA program includes all 15 
largest online advertising networks and that the brands that 
participate in this program are household names. To mention a 
few: Google, Microsoft, Yahoo!, GM, American Express, Bank of 
America, Disney, Procter & Gamble, Target, Wal-Mart, AT&T, 
Verizon, Comcast, Time Warner Cable, Honda, Hyundai, Toyota, 
Dell, HP, the list goes on, but I think you get the sense of 
how all of these companies understand that this is a critical 
program, a critical and credible program that they, too, want 
to be part of.
    My written testimony describes our achievements in greater 
detail, but I would like to highlight a few key elements for 
the subcommittee. First, the advertising option icon shown in 
this program is a key feature of the program, and as mentioned 
earlier, this is what consumers see if they click on it, they 
get in one or two clicks and are able to opt out.
    The self-regulatory program: Second, the DAA program is 
effective and easy to use for consumers. When the ad is 
delivered is at the exact moment that consumers are likely to 
want to take action and make a choice about their preferences, 
and finally, the program is backed up by strong enforcement, 
managed through both DMA and the Council of Better Business 
Bureau. Thank you very much for the opportunity to testify.
    [The prepared statement of Ms. Woolley follows:]

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    Mrs. Bono Mack. Thank you, Ms. Woolley.
    Dr. Acquisti, you are recognized for 5 minutes.


    Mr. Acquisti. Thank you, Chairman Bono Mack, Ranking Member 
Butterfield, and members of the subcommittee, it is my honor to 
be here today.
    My name is Alessandro Acquisti. I am an associate professor 
at the Heinz College, Carnegie Mellon University. I have been 
studying the economics of privacy for about 10 years.
    Surveys have found repeatedly evidence of widespread 
privacy concerns among U.S. consumers. Most Americans believe 
that privacy is a right, and this right is under threat. They 
express concerns over the way businesses collect personal 
information and favor government intervention over self-
regulation as a means to protect privacy.
    Consumers are especially troubled by tracking technologies. 
A vast majority of individuals express elevated concerns about 
the usage of their location data and significant distrust 
towards targeted advertising. However, other studies have found 
discrepancies between privacy attitudes, what people say in 
surveys, and actual behavior. Individuals like sharing 
information online with friends and seem willing to trade 
privacy for convenience and personalized services.
    Now, consumers' willingness to share personal information 
is not in contradiction with their desire for privacy. However, 
behavioral research has shown that consumers face significant 
challenges in navigating complex privacy trade-offs in the 
marketplace in ways which reflect their self-interests.
    One problem highlighted by research is that consumers often 
do not know what happens to their data or are provided 
confusing, sometimes even misleading information about their 
data. Choice and notification regimes are unlikely to solve the 
problem. By the time the consumer learns how to deal with a 
privacy sensitive technology, often a new and more intrusive 
technology has already appeared, catching the consumer 
unprepared. Furthermore, if we assume that consumers will 
actually read the privacy policies, studies have shown that the 
opportunity costs for the U.S. economy or the time spent 
actually reading those policies will be about two-thirds of a 
trillion dollars a year.
    These problems are magnified by the proliferation of 
consumer tracking across multiple sites and progresses in data 
mining, which make it possible to re-identify individuals and 
make sensitive inferences from data which seemed anonymous. In 
a recent experiment at Carnegie Mellon, we predicted 
individuals' Social Security numbers simply starting from their 
faces. Individuals and consumers are at a loss here because 
they cannot predict how the innocuous information they reveal 
today will be combined to produce more sensitive inferences 
    A second problem relates to systematic biases, mistakes 
people make when trading off privacy and disclosure. Consider 
instant gratification bias. Human beings tend to value the 
present more than the future and therefore underappreciate the 
negative consequences of current actions. While the benefits of 
information disclosure are often immediate, the costs of 
disclosures happen in the future. Therefore consumers may 
disclose data today that puts them at great risk tomorrow.
    Consider also the paradox of control. At CMU, we did 
experiments and found that increasing control of a person's 
information can decrease concern about privacy but 
paradoxically increases individuals' propensity to disclose 
sensitive information to strangers, even when the objective 
risks are actually increasing. So, in a way, more control, less 
    In other experiments, we found that individuals can be 
manipulated to disclose more or less information with subtle 
changes to the interfaces of Internet services. There is 
evidence that online companies have used similar strategies to 
nudge users toward more disclosure. So self-regulatory 
solutions are unlikely to solve this kind of a problem.
    In a way, this research indicates that there is no complete 
free choice on the Internet. What I mean is that even before 
the first visitor has arrived to a Web site, the engineers of 
the Web site have made design decisions that will impact the 
future behavior of the visitor and in fact also how much the 
person will reveal.
    So privacy is becoming less about control over your 
information and more about the control that others can have 
over you if they have your information. In economic terms, the 
notion that as consumers, we receive free online services is 
only partially accurate. The other side is that in reality 
information doesn't pay the bills at the end of the month. The 
free services consumers get are paid by consumers by purchasing 
goods at prices which they are nudged to accept based on 
information firms have about them.
    Now for the good news. Industry and academic laboratories 
across the United States have also developed other technologies 
which can protect privacy without sacrificing firms' ability to 
innovate. I am referring to privacy enhancing technologies, in 
particular through the type of technologies which work by 
anonymizing individual data in ways which are both effective, 
in the sense that reidentification becomes very hard, and 
efficient, in the sense that transactions can still be 
    This means that we can still tap economics as a natural 
resource without sacrificing consumer privacy. Therefore, a 
critical question for Congress is how to create incentives so 
that we can foster the progress and the deployment of those 
    Thank you, and I look forward to answering any questions.
    [The prepared statement of Mr. Acquisti follows:]

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    Mrs. Bono Mack. Thank you very much.
    And Ms. Dixon, you are now recognized for 5 minutes.

                     STATEMENT OF PAM DIXON

    Ms. Dixon. Thank you.
    Thank you for the invitation to come here today. I 
appreciate it very much. Just three quick things. First, I 
think we have heard today that from industry and academics, 
that consumers just don't know what the risks are out there, 
and we all drive cars, but we are not all mechanics. Likewise, 
consumers are on the Internet, but they are not all technical 
experts. This is not a surprise to any of us.
    It is so frustrating when we get consumer phone calls, and 
there is a solution for them, but they don't know about it. And 
we talk to them about it, but that is just one consumer that we 
have helped. There are millions and millions of consumers in 
this particular boat.
    How do we help all these consumers who are unaware of these 
technical risks that we face online? It is a very difficult 
challenge, but the one thing that surveys are very clear on is 
that consumers are completely almost unaware of the risks they 
face. It would be very challenging for a consumer to simply 
keep up with everything that is going on between a tracking 
cookie and a this and a that.
    But secondly, as Alessandro has talked about, consumers do 
not understand the privacy trade-offs that they are looking at, 
when they are looking at privacy policies and icons. This is a 
deep problem that is not going to be solved by pretty much 
anything. This is a human nature problem.
    So a consumer goes to a Web site, they see a privacy policy 
or they see a seal or an icon. What do they think? They think 
that their information is not collected, that their information 
is not sold, bartered, et cetera. This is simply not usually 
the case, but this is what consumers believe. This is a 
fundamental perception issue that is going to need to shift for 
consumers to be able to take adequate protective actions for 
    So, as a result of these structural imbalances on the Web, 
we support legislation that will protect consumers. However, 
the reality check is that we don't see any likelihood of that 
happening in the near future.
    So what is a consumer to do? What is to happen now? What 
are we faced with here? I think that what we need to do is look 
at self-regulation. If self-regulation is going to be the way 
forward, we need to reform it. There are a lot of structural 
issues with self-regulation today. Self-regulation today bears 
many of the hallmarks that self-regulatory efforts for privacy 
in the past have also shared.
    I have included a checklist of 15 items that a credible 
self-regulatory regime should have. Among these include greater 
transparency; a defined and permanent role for consumers; 
composition of a board, a governing board that includes a 
majority of consumer involvement. All of these things would go 
far to improve the current self-regulatory schemes in play 
today. So we advocate for greatly improved and reformed self-
regulation. I think it is an important thing to look at.
    The second thing is that we think that there needs to be a 
broader scope of discussion. It is very frustrating for me when 
I hear discussions about online advertising because when we get 
calls from consumers, they are not talking about what ads they 
have been shown, not usually; it is pretty rare. They are 
talking about their health data that has been used against 
them, that an employer has found. They are talking about when 
they have gone to a Web site, they have signed up for a survey, 
and then they found out later that that information was sold 
because they just didn't read the privacy policy.
    We have got to look at the broader array of privacy issues. 
Some of these issues do include advertising because 
advertisings are part of the collection mechanism online. That 
is the role we need to look at. So when we are talking about 
opt-outs, it is great that there is so much more activity with 
opt-out and that the opt-out is better. We support that, and I 
think it is terrific. It is. It really is. It is much, much 
better than it was even 2 years ago.
    But what are consumers getting the right to opt out of? Are 
they getting the right to opt out of tracking or being shown an 
ad? We need to deliver opt-outs that confer fundamental choices 
to consumers, like opting out of tracking. So this is what we 
think is really important to focus on.
    And then just a quick word. Many of the self-regulatory 
regimes today focus on very narrow aspects of online privacy. 
So, for example, if a consumer with a health condition was to 
go to a Web site to research AIDS or cancer or Alzheimer's for 
an aging parent, that consumer's information can be tracked and 
then used in ways that may be counter to their expectations. 
This is exactly the kind of thing that we need to work with. 
Does it harm a person to be shown an ad about Alzheimer's? That 
is debatable. In some cases, I think young teen girls being 
shown weight loss ads; that can be harmful. But other, you 
know, a red car or a blue car; I am not so worried about that. 
I am worried about the collection of the data, the tracking, 
and the reuse. So that is my statement, and thank you for your 
time and attention.
    [The prepared statement of Ms. Dixon follows:]

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    Mrs. Bono Mack. Thank you, Ms. Dixon.
    And now I will recognize myself for 5 minutes for 
questioning. I would like to start with Mr. Meyer.
    In your testimony, you state that since October 2010, your 
icon has been featured in over 85 billion ads, that consumers 
have clicked the icon 4.5 million times, and that consumers 
have submitted 730,000 opt-out requests. That is not a real 
high success rate I would think.
    On your slide, I noticed the icon, and I toured Intuit a 
little while ago, and they had some pretty fantastic technology 
that tracked the eyeballs as they followed around the screen. 
What kind of testing did you do of your icon and clicking on 
that icon, is that evident enough for the consumers, or is this 
not quite there yet as being as obvious to consumers as it 
could be?
    Mr. Meyer. Sure. So I think that we do a lot of testing, 
and the challenge with the size of the icon in the ad is that 
we are working with a small amount of real estate, and we have 
to balance the notification about online tracking with the 
ability for the ad to actually perform, and we have to enable 
marketers to continue to meet their needs. The icon was created 
through a cross-industry and cross-functional group that 
included academics and industry, and it was tested reasonably 
    And very importantly, I would end with the icon is not an 
opt-out mechanism. The icon is an education mechanism. One of 
the important features is the ability to opt out, and in terms 
of the performance rates in terms of the clicks relative to the 
performance of overall online advertising, it is very 
consistent; general online advertising ads click rates 
generally are under 1 percent anyhow.
    Mrs. Bono Mack. Can you--and let me clarify a little bit 
about what I am saying about the success rate of that, whether 
that is driven by your design or whether it is driven by 
consumer expectations is, I think, the point of the whole 
hearing, but on all of these different cookies, can you briefly 
explain the difference between tracking, session, persistent, 
flash cookie, super cookie, and if there is absolutely no 
technological answer on the horizon that could wipe all of 
those things out?
    Mr. Meyer. So the technological answers exist today for 
almost all the different types of cookies.
    Mrs. Bono Mack. Even a super cookie?
    Mr. Meyer. Super cookies are the one piece that we at 
Evidon think should not be used for any form of online 
advertising. That is not what they are designed for. We don't 
think there is any legitimate purpose in online advertising for 
super cookies.
    All the other forms of cookies that you allude to, that you 
mention, are easily accessible. The most basic are HTML cookies 
that are used for what are called session and permanent 
cookies, and those can be erased through the opt-out mechanism 
that we provide. We also own and operate a service called 
Ghostery, which is one of the most popular privacy protection 
tools for consumers. More than 4 million people have downloaded 
it. That completely blocks advertising. It essentially creates 
the on-off switch that is envisioned by ``do not track.''
    Mrs. Bono Mack. So Ghostery is a lot stronger than if I 
just go into my own browser and I hit delete cookies?
    Mr. Meyer. That is true.
    Mrs. Bono Mack. If I can go to Ms. Lawler, thank you for 
your testimony, and for me, something that has struck me over 
all of these years is the migration of what the content 
industry has been faced with, that it is impossible to compete 
against free. And I know that Intuit has tried, they have now 
Mint.com, so you have both the Quicken and the Mint. Can you 
explain, are consumers understanding the difference? Are they 
enjoying the free program better? Are they migrating to free 
because they are getting some trade-offs? Can you explain 
briefly your experiences with the two?
    Ms. Lawler. Yes. So let me start and say there is--Quicken 
is actually our flagship product. That is where Intuit started 
nearly 30 years ago, and so that is downloadable software or 
CD-based software that you run on your desktop, so you pay for 
    I think what you are asking is where the business model 
goes and where consumers are going is to an online-based 
service. In the case of Mint.com, Mint is free, and so you are 
not paying for that. You can actually use some of the tools on 
Mint without even signing up for it. When you go to the Mint 
page, it is very simple, easy, clear to understand what the 
value is, what you can do in terms of managing your budget, 
tracking expenses.
    How that gets paid for is through the option for you to get 
    Mrs. Bono Mack. But my question specifically is, are you 
finding that consumers are going toward the free site rather 
than the--either the downloading, you buy the CD-ROM at----
    Ms. Lawler. They are moving over time. I don't have the 
specific numbers with me. I would be happy to go find that 
information for you and bring it back to the committee at a 
later date. What we are finding is that there is a gradual move 
to online. Some of that is technology based, so those who are 
more comfortable with mobile technologies. It is also somewhat 
generational, so as we see young people more comfortable with 
using free online services or any online service, there is 
definitely a trend toward online, but it is very slow and 
gradual, so small percentages over the years.
    Mrs. Bono Mack. All right, thank you.
    My time has expired.
    Mr. Towns, you are recognized for 5 minutes.
    Mr. Towns. Thank you very much, Madam Chair.
    Let me begin with you, Ms. Dixon. I understand that there 
was a study in California of Internet users, and of course, 
could you please talk about that just for a moment in terms of 
what happened?
    Ms. Dixon. Yes, I believe you are referring to the Chris 
Hoofnagle and Jennifer King study that----
    Mr. Towns. In 2008?
    Ms. Dixon. Yes.
    Mr. Towns. Yes, right.
    Ms. Dixon. It was a groundbreaking study. What they did was 
they went and surveyed online users and asked them what they 
perceived when they saw privacy policies online. And their 
findings were remarkable because the misperceptions were just 
profound. So, for example, a majority of consumers, when they 
saw a privacy policy, believed that that meant that the site 
would not collect information about them, even collect. Users 
also believed that they would have the right to sue if the site 
did things with their data that they did not want, and these 
were just among a few of the many misperceptions that consumers 
had about privacy policies when they saw them, and consumers, 
very few consumers understood that when, for example, they 
opted out--there were questions about, you know, various 
cookies and what not. Consumers just did not understand that 
when they opted out with an opt-out cookie, that it didn't mean 
that they were not going to be tracked; it just meant that they 
were not going to be given display ads based on tracking. So 
there was a profound, deep, serious misunderstanding and 
misperception of what privacy policies actually mean when they 
are on a site.
    Mr. Towns. Thank you very much.
    Dr. Acquisti, do you think privacy policies serve any 
useful purpose for the consumers?
    Mr. Acquisti. They do. I see them as necessary, not 
sufficient, conditions in the sense that we do need privacy 
policies because we need to inform and educate the consumers. 
They are not sufficient, however, because of the type of 
challenges I was describing in my testimony.
    Mrs. Bono Mack. Excuse me one second, if the gentleman will 
suspend. I am asked to notify you, while there are protestors 
in the hallway, we don't expect it to get out of hand, but if 
it does, please exit that door.
    Mr. Towns. You don't have to worry about it, I am here. I 
am here, don't worry about it.
    Mrs. Bono Mack. There you go. I feel so comfortable now. 
Thank you, please continue.
    Mr. Towns. Yes, you may continue.
    Mr. Acquisti. So the challenges I was mentioning, just to 
summarize, are, one, the problem of--economists call it bounded 
rationality. We don't have unlimited time to think about all 
the possible consequences. Even if we read a policy, we may not 
think through what it really implies. Some policies are written 
in ways which are not easily understood. One study a few years 
ago reported that half of privacy policies on the Internet are 
not understood by about 60 percent of Internet users. Plus 
there is also this additional challenge that if we take these 
policies seriously, and we really believe that users, after 
reading privacy policies, do not know what happens to their 
data, the opportunity cost is enormous.
    Mr. Towns. Thank you very much.
    Mr. Hintze, I followed your company in terms of I know you 
have a privacy officer. Basically what is the role of that 
privacy officer?
    Mr. Hintze. Well, we have a number of people at Microsoft 
focused on privacy. We have got our chief privacy officer, who 
is responsible for the overall governance of privacy programs 
within Microsoft, and that includes training for our employees, 
whether they are developers or marketers or human resources 
folks. It includes the development of our standards and 
guidelines that we provide around marketing, around product 
development, et cetera. It includes building in privacy 
checkpoints and privacy training and privacy standards into our 
business processes. So our chief privacy officer oversees all 
of that.
    He also oversees, not necessarily direct reporting 
relationships, but kind of a dotted-line relationship to all 
the people in Microsoft who are focused on privacy, and we have 
over 40 full-time people focused on privacy and another 400 who 
have it as a defined part of their job, and those people are 
embedded in every business and operations unit of the company.
    Mr. Towns. Short of strongly regulating business, which 
would probably do more harm than good, what can we do to 
encourage other companies to consider privacy issues very 
    Mr. Hintze. As I mentioned in my testimony, I think that 
there are roles for multiple entities in protecting privacy 
from government, individual companies, to academics and privacy 
advocates as we have represented on the panel here today. I 
think individual companies like ourselves can lead by example 
by adopting strong privacy practices. We have made those 
internal standards that I talked about for developing products 
and services and building privacy protections into those; we 
have made those publicly available so that others can see them 
and take advantage of the work that we have done over the years 
in developing those.
    Privacy advocates clearly have a role in helping to educate 
consumers and bring to the attention issues that come up and 
nudging industry in appropriate ways to do the right thing. And 
government has a role through enforcement when people are 
breaking existing laws through using your own bully pulpit to 
educate your constituents and playing the oversight role that 
this committee has done so well for so many years.
    Mr. Towns. Thank you so much. We salute you and your 
    Mrs. Bono Mack. The Chair now recognizes Mr. Blackburn for 
5 minutes.
    Mrs. Blackburn. Mr. Meyer, I want to come to you.
    I know that Evidon is partnering with Akamai? Am I saying 
that correctly?
    There was a Wall Street Journal article on it saying that 
you would handle, what is it, trillions of interactions, a 
trillion interactions a day. So let's talk about the consumer.
    Now, with your platform, tell me what this means for the 
consumer. How does it empower them? How does it allow them to 
continue to protect or have the ability to protect what I term 
the virtual you, their presence online?
    So just in about 15, 20 seconds, can you give me that 
    Mr. Meyer. I will do my best.
    So Akamai powers more than a trillion Internet transactions 
every day. The Evidon technology, which you saw in my slides 
and in my testimony, will now be built directly into that 
platform, which will take the process of Web site operators of 
all forms, and it will take the process of complying with the 
program and giving consumers that view into their virtual you. 
It will take what is now a reasonably complex legal and 
technical process, and it will simplify to literally a few 
clicks and a short one.
    Mrs. Blackburn. So you are saying your ability is 
simplicity and transparency and access. Is that what I am 
hearing you say?
    Mr. Meyer. That is the goal of us and Akamai getting 
together for this.
    Mrs. Blackburn. That is what I wanted to know. I was 
unclear. The B2B is fine, but I want to know what you are going 
to do for the consumer. How are you going be able to protect 
their privacy?
    Ms. Woolley, I want to ask you pretty much the same thing. 
Do you think that industry can do a better job than government 
in addressing these privacy concerns that you all have rolled 
out with the Ad Choice campaign?
    Ms. Woolley. Yes, I absolutely think that industry can do a 
better job than government. The main reason is that we are 
nimble, and we can move quickly. We have rolled out this 
program in a year. And we are now rolling out further 
iterations of the program, which include migration of that icon 
overseas and migration of that icon to mobile devices. To do 
that in less than a year is something that government could not 
    Mrs. Blackburn. In your testimony, you mentioned protecting 
data in terms of the cost to jobs, cost to the economy. And 
would you just elaborate on that just a tiny bit?
    Ms. Woolley. Sure. There have been several studies that 
show that if the United States were to adopt a privacy regime 
along the lines of what Europe has adopted that the cost----
    Mrs. Blackburn. ``Do not track.''
    Ms. Woolley. ``Do not track.'' And do not use cookies. The 
cost to our economy would be about $33 billion a year.
    Mrs. Blackburn. OK. Thank you.
    I have a series of yes-and-no questions that I wanted to go 
through. So if you all will listen, and I will have you raise 
your hand for yes and your hand for no.
    OK. Do you believe that a government mandated ``do not 
track'' as the FTC has endorsed has gone too far and would be 
too much to address the privacy problem? Yes, if you believe 
``do not track'' goes too far, raise your hands. OK. So I have 
got four on that.
    And no. One no. And the rest abstain. So you are going to 
be a no, too. I like decisiveness here.
    Second question: Do you believe that government regulations 
on commercial use of de-identified metadata or anonymous data 
sets pose significant challenges to the First Amendment? So do 
you believe that government regulations on commercial uses of 
de-identified metadata or anonymous data sets pose significant 
challenges to the First Amendment. Yes? OK. We have got two 
    No? We have got two noes. And the rest are thinking.
    Congress and the Federal Government in general have a low 
approval rating. We admit that. Yes or no, do you think 
consumers--here is the question, yes or no, this is what I want 
to hear from you all: Do you think consumers trust government 
to know best how to protect their privacy through rules, 
mandates, legislation, or no? Do they trust the government to 
do it, or do they trust you?
    Yes, if they trust government. Just two of you would trust 
the government.
    No, they don't trust the government. They would trust 
industry, one. Like these hands kind of waving out there.
    Do you believe that new privacy regulations could have an 
adverse impact on industry competition that would hinder 
smaller firms, some of the innovative firms?
    Do you believe new privacy regulations could have an 
adverse impact on industry competition that would hinder 
smaller firms or no?
    Yes if you believe it is going to have a----
    We have got two on the yes side.
    No, not going to impact.
    One no.
    I am going to let you off the hook because my time has 
expired. Thank you.
    Mrs. Bono Mack. The chair thanks the gentlelady and now 
recognizes Mr. Lance for 5 minutes.
    Mr. Lance. Good morning to all. This is very interesting, 
and I have learned a great deal.
    To Ms. Lawler, do you know what percentage of your 
customers view and manipulate the privacy options that you 
offer them?
    Ms. Lawler. We have a couple of different ways that we 
approach privacy choices. If you think about the traditional 
choices that most companies have offered for the last several 
years, which would be in the marketing space--so around phone 
calls, e-mails, snail mail and so on--it is a fairly small 
percentage. I don't have all of the numbers with me. I can tell 
you that in our email marketing, specifically that our opt-out 
rates are at about the industry average, but I would be happy 
to research that more with our technicians.
    Mr. Lance. What is the industry average?
    Ms. Lawler. It is about 0.05 to 0.1. It depends upon the 
type of ad and the context.
    Mr. Lance. Thank you. Thank you very much.
    To Professor Acquisti, your testimony includes an 
interesting point that I am not sure has been raised before. 
You call it the paradox of control. In other words, the more 
privacy choices a consumer has, the more likely that consumer 
is to have a false sense of security. Does this argue against 
more granular controls, or if you would elaborate on your views 
on that?
    Mr. Acquisti. It was a paradoxical result. To explain it 
with an analogy, other studies have shown that when you ask 
people to wear seatbelts, they--some of them may start driving 
faster. It is probably overconfidence. You feel more protected, 
you end up taking more risks.
    So we believe that this is what is happening in the results 
we found is you make consumers feel more in control, the ones 
deciding with the agency of deciding whether or not to disburse 
information, which in a normative sense is a good thing, the 
unexpected consequence can be that this overconfidence can lead 
to the consumer taking more risk.
    What I mean by more risk, and I have to be very careful, is 
compared to a condition where there was no such feeling of 
control, the subjects in the control ended up revealing more 
sensitive information to more strangers.
    Mr. Lance. So how would you overcome that challenge?
    Mr. Acquisti. Well, it is central what kind of control do 
we give, and whether control solves all of the problems. So the 
results of the study suggest that merely giving granular 
control may not solve consumer decision-making problems if the 
control leads to bad decisions later on.
    It is not a statement about we should never give control, 
of course. It is about what matter, what type of control we 
give and whether by giving control, do we feel that we have 
solved privacy problems.
    The results of the experiment, such as the answer to the 
last question, is no.
    Mr. Lance. Thank you very much.
    To Mr. Hintze from Microsoft, you state that consumer 
attitudes to privacy can evolve over time--I am sure that is 
true--noting how consumers were originally hesitant to share 
photos and videos online, but now regularly do so. Have you 
seen any evidence where consumers are evolving in the opposite 
direction to restrict the collection and sharing of their 
information online with commercial operators?
    Mr. Hintze. I am not sure I can point to any particular 
statistics that would show that, but I certainly think that we 
see more of an awareness of privacy than we did a few years 
    I agree with the comments that Ms. Dixon made that people 
don't always fully understand all of what is going on, and it 
is always a challenge to get the right information in front of 
consumers, but you do see a heightened awareness, and that is 
in large part due to the work of privacy advocates and many of 
the journalists. And we have all seen the Wall Street Journal 
series of articles and other publications that have been 
focused on privacy.
    Whether that translates into people making different 
choices, that is hard to quantify, and I am not quite sure how 
we would do that. But we certainly see more people looking at 
our privacy Web pages now than we have in the past, and it is 
certainly something that we are cognizant of and want to make 
sure we are responsive to those concerns.
    Mr. Lance. Thank you very much. My thanks to the panel.
    I yield back the remainder of my time.
    Mrs. Bono Mack. The chair now recognizes Mr. Gonzalez for 5 
    Mr. Gonzalez. Thank you very much. I appreciate it.
    I apologize for not being here for the testimony. I had the 
opportunity to review written statements that were submitted. 
Again, I wish I could have been here for the testimony because 
it is incredibly important to have you here today and to share 
your viewpoints and your own experiences.
    My first observation, of course, is information gathering, 
dissemination, protection of same and so on, and how important 
that is to different industries.
    So I guess I want to acknowledge that in this informational 
age and how we market, how we promote products and services in 
our system is incredibly important, and things have been 
revolutionized. And the fact that you can now target audiences, 
which I think is a tremendous advantage--it makes a more 
effective way for those individuals in this country that have 
different business enterprises to reach their customers. And 
you know what happens when we reach customers? And that means 
we in fact do create wealth for many, and we create jobs in 
this country.
    So I want to acknowledge the importance of information 
gathering, what it means, and that many of the services that 
are provided today, as we say free, really constitute a trade. 
You will receive some sort of service through the Internet one 
way or another in return for allowing the person that is 
providing you this service or benefit the opportunity to 
basically establish some sort of consumer DNA. And that is the 
world that we live in.
    And I think, as I came in, one of the things that Mr. 
Hintze was pointing out is really whether the consumer is aware 
of the information that they are providing and its use.
    And we have struggled with this in the past, even years ago 
when I was on financial services, as to what an affiliate would 
    But what it comes down to--Mr. Hintze, I was reading your 
testimony, and it is very interesting because you have 
different points. But one of them of course is technological 
tools. And that is that you, with Microsoft, could provide the 
consumer and the user of the Internet with the ability to 
basically not allow any kind of tracking to establish this 
consumer identity or DNA. Is that correct?
    Mr. Hintze. That is right. In the testimony, I briefly 
mentioned the features we built into Internet Explorer 9 in 
response to the call for ``do not tracking'' mechanisms that 
are browser-based.
    And if I could expand on that slightly, what Internet 
Explorer 9 does with the tracking protection feature is that it 
allows consumers to turn on this feature and import any 
tracking protection lists that they want, which would be a list 
of third party sites that may be tracking individuals across 
the Internet. And when you turn this on, it blocks those 
connections to those third parties.
    So, for example, if you went to a major news site and there 
were 10 third parties providing content on that site, which is 
not an uncommon scenario--a couple of them may be advertising 
networks. One may be a stock ticker; one may be an embedded 
video, all coming from different sites. If one or more of those 
sites were listed on a tracking protection list that a user had 
installed through this feature, that call just wouldn't be 
made, and that would cut off any ability for that third party 
to collect any information because it is blocking the content 
coming down, and it is blocking any other connection going back 
up to that third party. So the nice thing about that is it is 
technology neutral. It doesn't matter if they are tracking 
through a cookie or through logging IP addresses, or even one 
of these super cookie mechanisms, the connection just isn't 
    It is kind of a sledgehammer approach. It blocks the 
content, too, but it is very effective.
    In contrast to some of the other ``do not track'' 
mechanisms that have been mentioned during the opening 
statement of Ms. Bono Mack, she mentioned that the Mozilla 
approach sends a signal to the receiving Web site that says 
``do not track.'' The problem is there has been no definition 
or common understanding as to what a Web site is supposed to do 
in response to that signal. And we are working with the World 
Wide Web consortium and with Mozilla and with privacy advocates 
to try to provide some definition around that, so that there 
are additional choices for consumers that we support.
    But in the interim, the approach that we have taken is 
effective and doesn't rely on the receiving third party to make 
any choices or decisions.
    Mr. Gonzalez. Technology has created, we want to say it the 
dilemma or the challenge, so technology would be the answer. 
And I only have a few seconds. But let me get this straight.
    What you are able to provide the Internet user is going to 
be where they select the third party sites. This is not going 
to be a generic or universal application where I, Charley 
Gonzalez, I could just have this feature, and I don't have to 
identify a particular third party; it would just be all 
encompassing. It doesn't matter what contact or who I contact 
or who I connect with, I wouldn't have the ability to have that 
feature. It is all contingent on identifying the third party 
    Mr. Hintze. You can download a list from an entity you 
trust; a privacy advocacy organization could publish a tracking 
protection list. Any organization could publish one. You could 
create one yourself, but as you mentioned, you would have to 
know. But you can rely on an organization to do that. And there 
are some out there that are very comprehensive. They have many, 
many third parties on there, that if you import that, it would 
block those third parties. So you don't have to do that sort of 
leg work yourself. You could rely on a trusted entity that you 
    Mr. Gonzalez. You are on the right track.
    Again--Madam Chair, if I could have a few extra seconds----
    Mrs. Bono Mack. There will be a second round if we can.
    Mr. Gonzalez. I think we are going to have a second round, 
so if you can wait my turn again.
    Mrs. Bono Mack. The chair now recognizes Mr. Guthrie for 5 
    Mr. Guthrie. Thank you, Madam Chair.
    Thank you for coming. Thank you for being here today.
    Just a couple of questions as we move forward.
    Advertising has always been about behavior. All of us are 
behavior advertisers. I want to send pieces of mail to people 
who vote. So we always get the voter rolls out, and we go 
through. I know it is a public record, but it is private 
behavior that is made public for us to move forward and see.
    But what we have to do is to try to balance now that things 
are in hypermode with the technology. If you make a phone call, 
somebody knows where you are, they can find out where you are 
at all times. If you use your discount card, that is why they 
give you a discount; they want you to swipe it so they can 
track your behavior shopping so they know how things are going.
    But the question is we have got to try to balance.
    I know that Bing, Yahoo, Google, any search engine wants to 
outdo the other one. They want to be faster, better because 
they want me to go to it, because the more people that go to 
it, the more valuable their advertising space is, just like if 
I want to watch a Kentucky basketball game for free, they have 
got to take a break every 8 minutes to show a commercial, so I 
can watch it for free. And that has happened on the Internet, 
but the difference is they can individualize it, I guess.
    So I guess my point is, and I guess Dr. Acquisti, since you 
studied this--and you said you didn't think it would affect the 
economic behavior of this; we talked about the $33 billion of 
job loss. Ms. Blackburn asked a question. You said you didn't 
think it would affect it.
    If the search engines aren't getting the revenue from the 
advertising to let me to use it for free and they are competing 
against each other to make it better, so it is far better than 
it was a year ago, what is going to drive that innovation if 
the advertising dollars--if we follow the European model, what 
is going to drive the innovation or continue to be free to me, 
or will we have to start paying for it like when we did debit 
cards? We took a vote here to change the debit cards. Now the 
people who voted for it are complaining about the fact that 
banks are charging for it. So, I mean, that is the question 
what I want to ask you. How is it not going to affect--how is 
it going to work economically if we do the European style 
    Mr. Acquisti. Definitely. So to clarify the point I was 
making in the testimony was not that there will be no effects, 
but rather I was pointing out that the so-called free goods we 
get online are free only if you don't consider the fact that we 
end up paying for them as consumers through a different channel 
as we purchase the goods, which are offered online.
    Mr. Guthrie. Like watching a sports game on television for 
free. You have got to sit through the commercial to watch it.
    Mr. Acquisti. That was the point I was trying to make.
    Mr. Guthrie. Or you can do Pay-Per-View and watch it 
without commercials. But a lot of us don't want to pay for a 
search engine. We just want it. And so who is going to pay for 
it if we don't do it? Is the model that you have to pay 
individually, like you have to sign up for a search engine, 
like $10 a month or something as opposed to getting it for 
free? How is it going to work if we don't have advertising?
    Mr. Acquisti. Actually, if I may, the alternative I don't 
believe is between no advertising and advertising. First of 
all, this is in parentheses, free content existed even before 
the age of behavior advertising. In fact, we don't know exactly 
how much of the free content now available online is due to 
behavior advertising versus quote-unquote more traditional.
    Mr. Guthrie. I only have a minute and a half. So maybe we 
can catch you in the second round.
    I wanted to ask Ms. Dixon. I had an uncle or great uncle 
who had early-onset Alzheimer's. He died in his 50s. I am 47 
now. So if I go online and maybe I don't know this and I Google 
early-onset Alzheimer's, what do I need to fear that I don't 
know, because if I Google that right now, what could happen-- 
because you were saying that--I mean what would happen if I 
went in and search-engined that, what could happen to me that I 
don't know about?
    Ms. Dixon. In a search engine, I don't think you have so 
much trouble because most of the ads are contextual, and it is 
really not that big of a deal. Maybe you will find a rogue 
actor advertiser, who is kind of a low-hanging fruit and out of 
the ballpark and not playing by the rules.
    But in general, where you really need to be concerned is 
when you go to--a couple of different things. There are three 
scenarios. One, you go to a scammy site that is just built 
based on fear, and someone slapped up a Web site, and there are 
all sets of third parties on it, and they are gathering up any 
information you are filling into a form, and they are selling 
it on to a direct marketing list. That happens more often than 
I even want to describe. It is a terrible thing when it happens 
to anyone. That is what you need to fear.
    The second thing would be if you go to let's say a very 
legitimate Web site. It is a legitimate business. There are 
some very large Web sites that you could go to that focus on 
health care and type in your query. What can happen is that you 
simply begin to see advertisements that are focused on early 
Alzheimer's. That is really not that big of an outcome in my 
book. That doesn't bother me that much.
    What bothers me more is that there may be a number of third 
party entities on that page. It could be advertisers; it could 
be other kinds of third parties. It could be Facebook. It could 
be all sorts of different third parties now in this new kind of 
digital technology.
    Mr. Guthrie. What can they do to me?
    Ms. Dixon. Well, that is the thing. What they can do is 
they can take that information that you have given and merge it 
with other information, and that becomes a part of a profile 
about you or the computer you are using. If you have registered 
for the site, it becomes part of your profile.
    Mr. Guthrie. And somebody would use that to do what that 
would be negative?
    Ms. Dixon. They can sell it. They can sell it outright. It 
happens every day.
    Mr. Guthrie. So somebody can say, ``He must have 
Alzheimer's'' because you Google that?
    Ms. Dixon. Or he is interested in Alzheimer's information.
    Mr. Guthrie. And that is bad. OK.
    Ms. Dixon. Or has Alzheimer's, correct.
    Mrs. Bono Mack. The gentleman's time has expired.
    The chair recognizes Mr. Butterfield for 5 minutes.
    Mr. Butterfield. I think we are all well aware that a lot 
of free content available on the Internet is made possible by 
advertising, all types of advertising, not just behaviorally 
targeted advertising. I think consumers understand that they 
get free content thanks to the ads that surround that content.
    But what they often don't understand is that the spaces 
where those ads are placed might sometimes be watching them.
    As one privacy expert who has looked at consumer attitudes 
and behavior regarding privacy has put it, consumers accept the 
idea that ads support free Internet content but do not expect 
data to be part of that exchange. Many in the Internet tracking 
industry argue that steps to empower consumers to decide for 
themselves whether they want to allow tracking of their online 
activity will kill free Internet content. I, for one, do not 
buy this argument. I don't buy it because reported advertising 
revenue numbers don't support it.
    The last figure that we have been able to track showed that 
revenue from behaviorally targeted ads was $925 million in 
2009. That is almost a billion dollars. This figure was 
reported in a large 2010 marketing industry blog post. This is 
the only easily accessible piece of information that we have 
been able to find that specifically breaks out revenue from 
these ads. In 2009, overall revenue from every type of Internet 
advertising was $22 billion, almost $23 billion.
    Now, the first question is open to anyone who wishes to 
respond. Can any of you provide more recent figures that 
clearly break out the amount spent on behaviorally targeted ads 
last year, not on display advertising generally or all online 
advertising, but specifically on behaviorally targeted ads? Do 
any of you have any data that you feel you can provide.
    As I used to say when I was a judge, let the record show 
that no one responded.
    Ms. Woolley. Let me just respond that according to the 
FTC's definition of what online behavioral advertising is, one 
of our partner trade associations in the DAA, the Internet 
Advertising Bureau, found that over 80 percent of the ads that 
are delivered are OBA or online behavioral advertising. And 
actually, I think, sir, the revenue number is significantly 
higher than the blog post that you cited. DMA has done several 
studies more recent than 2009 with global insight, and I think 
the number is actually substantially higher.
    Mr. Meyer. If I can add to that, I can follow up and get 
you the specific estimates. I think it is in the several 
billion dollars. And the other important thing to think about, 
there are two other important points.
    The first one is the definition of what is behavioral, and 
that is why a legislative approach could be so dangerous, 
because it could be anywhere from a reasonably small percentage 
to a number as high as 70 to 80 percent. That is the first 
    And the second one is that this is the fastest growing part 
of the online advertising industry. So if you break out the 
different pieces, the data-driven behavioral and network 
advertising is growing at the fastest rate inside of an overall 
very fast-growing industry, along with video advertising.
    Ms. Woolley. I guess one other point I would like to make 
here, too, is that there was a conversation about targeting 
individuals. I represent the Direct Marketing Association. 
Targeting individuals is not a new phenomenon. It is something 
that--the Direct Marketing Association is close to 100 years 
old. That is something that has gone on for close to 100 years. 
And direct marketing methods and techniques are part of the 
curriculum of almost every university that has a direct 
marketing program. So these are actual techniques and 
methodologies that are taught in university.
    So the thing that the Internet has done is make the process 
faster and more nimble. But the techniques and the methods are 
not new.
    Mr. Butterfield. All right. That is helpful.
    Thank you. I yield back.
    Mrs. Bono Mack. I thank the gentleman.
    The chair recognizes Mr. Kinzinger for 5 minutes.
    Mr. Kinzinger. Thank you, Madam Chair.
    Thank you all for coming out and for participating.
    I will be the first to say that I think government needs to 
put an end to needless regulations that do little to protect 
the consumer or protect jobs.
    But I am not convinced personally that ``do not track'' 
legislation is the right approach. I do have some serious 
concerns that without privacy protection, consumers can lose 
confidence in the online free market.
    Each of you represents responsible companies that are 
working to inform consumers in their privacy choices online. 
But in the end, you don't represent the bad actors that could 
potentially come and undermine your efforts.
    So my first question is to all of you, and we can do the 
hand raise thing. You all basically answered this, but I want 
to see for myself: Do you think the committee should pass 
privacy legislation to ensure the bad actors don't undermine 
your efforts?
    Who is a yes on that?
    And who is a no?
    So two noes.
    I am also deeply concerned by what a Stanford study that 
appeared in the National Journal yesterday said. The study 
shows that Web sites are unknowingly leaking email addresses, 
user names, and other personal information to ad networks. If 
consumers had the choice and were aware of this transfer of 
personal data, I don't believe the mass majority of consumers 
would support Web sites selling this personal information to 
outside parties. Should consumers be required to opt-in to 
allow Web sites to share this personal information?
    And let me also expand on that. I am not talking about a 
30-page privacy statement that nobody reads. I don't think I 
have ever read a 30-page privacy statement in my life. 
Something that should clearly be presented before it is being 
    So should opt-in be a requirement? I guess we can start 
right to left----
    Ms. Dixon. It is really complicated.
    Mr. Kinzinger. Well, let's try to keep it very short if we 
    Ms. Dixon. It is a challenging question to answer in a 
black-and-white manner. If there is a first party relationship, 
that is one thing, but if we are using first fair definitions 
of first party, first party fine. Third party, that is a whole 
different thing. It really needs to opt-in for third party.
    Mr. Kinzinger. Doctor?
    Mr. Acquisti. I actually agree exactly with the statement.
    Mr. Kinzinger. Anybody else have anything?
    Ms. Woolley. I have an opinion, and it is a complicated 
    The wonderful thing about the icon is that--which is over 
there; I don't think you were in the room when I mentioned 
that--is that it gives the consumers a choice about opting out 
of those third parties who are on a site and not allowing 
collection and use of the data. And it is easy. It is 
transparent. It is ubiquitous at this point. You can't be on 
the Internet without seeing the icon.
    Mr. Kinzinger. You are more of an opt-out versus an opt-in.
    Ms. Woolley. Well, there are lots of reasons that--the 
Stanford--and I don't even want to call it a study. It was the 
musings of a graduate student. It was not peer-reviewed. There 
was no methodology. That is all that it was. There are great 
reputable studies out there, but that was not one of them.
    As my colleague from Microsoft mentioned earlier, there are 
lots and lots of reasons why third parties are on Web sites. 
Some of them are there to serve ads. Some of them are there to 
collect information, but others are there to deliver content, 
like sport scores and stock scores. So if you are absolutely 
blocking third parties or you are collecting opt-ins for 
absolutely everything for third parties, the consumer has no--I 
mean, we go to CNN.com. We know what we want. And if I have to 
permit every single one of them, I don't know what I don't 
    Mr. Kinzinger. Any of the other three of you?
    Mr. Meyer. I would like to go back to something you said 
about ``do not track'' and the need for legislation. The reason 
I said no is because it already exists in the form of the 
Federal Trade Commission Act. Just this morning, the Federal 
Trade Commission settled with a company for deceptive trade 
practice. And the situation you described tends to be firmly in 
line with those deceptive trade practices, and that is the 
right role of government----
    Mr. Kinzinger. Thank you. I am going to have to cut you 
guys off because I have one more question.
    I have an update from a major telecom provider which says 
they are going to start sharing user information with local 
companies based on their physical address on an opt-out. They 
are also going to start recording and sharing URLs of Web sites 
visited with actual, physical locations of that users wireless 
device. It does say there will be no information that is 
personally identifiable, but after seeing the study, which you 
call into question but I have some interest in, I am not sure 
that it is possible. Should sharing a user's geolocation data 
with ad networks require a clear concise opt-in from the 
consumer? If we could go--do you three have anything, first?
    Mr. Hintze. I would be happy to address that.
    We operate a phone operating system as well as many of our 
other things in addition to our ad business, and our approach 
has been that we believe that the collection of precise 
geolocation information should require an affirmative consent 
on behalf of the user.
    Mr. Kinzinger. Does anyone disagree with that?
    Ms. Woolley. The one thing I do want to say is if 
information as you are describing it right here is aggregated, 
that geolocation that is aggregated and not specific to an 
individual could be used for all sorts of business decisions, 
    Mr. Kinzinger. We are talking about marrying that with a 
specific individual, though, in this case.
    But thank you all for your generosity.
    I yield back.
    Mrs. Bono Mack. The chair recognizes Mr. Dingell for 5 
    Mr. Dingell. Madam Chairman, thank you. I commend you for 
this hearing.
    These questions are yes-or-no questions.
    To all witnesses, starting at your left--rather at your 
right and my left, is it your understanding that interest-based 
advertising supports much of the free content of the Internet, 
yes or no? Beginning with Ms. Lawler.
    Ms. Lawler. Yes.
    Mr. Hintze. Yes.
    Mr. Meyer. Yes.
    Ms. Woolley. Yes.
    Ms. Dixon. Yes.
    Mr. Dingell. No disagreement.
    Further, is it your understanding that the consumers expect 
much of the content they consume online to be free, yes or no?
    Ms. Lawler. Yes.
    Mr. Hintze. Yes.
    Mr. Meyer. Yes.
    Ms. Woolley. Yes.
    Mr. Acquisti. No.
    Mr. Dingell. So no disagreement on that.
    Do you believe that all consumers have the same view of 
interest-based advertising, yes or no?
    Ms. Lawler. No.
    Mr. Hintze. No.
    Mr. Meyer. No.
    Ms. Woolley. No.
    Mr. Acquisti. No.
    Mr. Dingell. So we have agreement there.
    To all witnesses, is it fair to say that imposing ridged 
privacy requirements on interest-based advertising would have a 
drastic effect on the way consumers currently experience the 
Internet, yes or no?
    Ms. Lawler. Can you ask the question again, please?
    Mr. Dingell. Is it fair to say that then imposing rigid 
privacy requirements on interest-based advertising would have a 
drastic effect on the way consumers currently experience the 
Internet, yes or no?
    Ms. Lawler. I am going to say probably.
    Mr. Hintze. I know you asked for a yes or no, but I think 
it depends on what you mean by rigid. We think there can be 
some baseline privacy requirements that are perfectly 
consistent with the business models and innovation that we are 
talking about.
    Mr. Dingell. I will not object to any of you panel members 
giving additional response for the purposes of the record 
because that is fair to you.
    Mr. Meyer.
    Mr. Meyer. I would agree with Mr. Hintze that it depends on 
the level of the rigidness, but the potential for it having a 
negative impact is unnecessarily high in my opinion.
    Mr. Dingell. Ma'am?
    Ms. Woolley. Well, I have to give you the lawyer answer, 
too, which is, it depends. Because I think our program imposes 
very rigid requirements, and I think the way we have done it 
does not adversely affect the Internet.
    Mr. Dingell. Our next two panel members, please?
    Mr. Acquisti. My answer is not necessarily.
    Ms. Dixon. My answer is not necessarily. However, I am not 
sure that is the only thing we should be focusing on.
    Mr. Dingell. So I guess that is a maybe.
    To all witnesses, do you believe that the current industry 
efforts to protect consumer data privacy are sufficient, yes or 
    Ms. Lawler. Yes, but we can do more.
    Mr. Hintze. Generally, yes.
    Mr. Dingell. If you please, Mr. Meyer?
    Mr. Meyer. We are off to a very good start, but we need the 
support of, in particular, of this committee and the Federal 
Trade Commission to accelerate the acceptance.
    Ms. Woolley. Could you repeat the question?
    Mr. Dingell. Do you believe that current industry efforts 
to protect consumer privacy are sufficient?
    Ms. Woolley. I believe that they are sufficient, but I also 
know that our program is evolving, so we have the ability to 
evolve and get stricter as times change.
    Mr. Acquisti. Unfortunately not, but I believe there are 
industries, privacy technologies which could definitely help.
    Ms. Dixon. At the current time no, however I believe that 
the efforts could be improved through self-regulatory reform, 
such as involving consumers, having independent bodies 
overseeing the efforts and other things that would----
    Mr. Dingell. I have a minute and 3 seconds left. Do you 
believe that such efforts can be improved, or do you believe 
that Congress should pass data privacy legislation?
    Ms. Lawler. We believe that there is a significant 
opportunity for businesses to come together and lead more and 
do more in a self-regulatory approach. If Congress were to act, 
it would need to be a principle-based approach that is flexible 
and nimble and is not overly prescriptive.
    Mr. Hintze. I think current efforts can be improved, and 
they are being improved, and I think that there is also a role 
for baseline privacy legislation.
    Mr. Meyer. I don't think it is necessary, but if there were 
any type of legislation, it would need to provide safe harbor 
for existing problems.
    Ms. Woolley. I do not think that legislation is necessary, 
and I think our table includes many wonderful American 
companies, including GM, and I would invite everybody here to 
be part of that program because our table is open.
    Mr. Dingell. Sir?
    Mr. Acquisti. I believe it can be improved and the 
legislation can foster the deployment of technologies based on 
public/privacy interaction focused on privacy and data sharing.
    Ms. Dixon. Legislation will help and improvement of the 
current regimes will help as well.
    Mr. Dingell. Now, again, to all witnesses. I am intrigued 
by the concept of ``do not track'' list. Is it advisable for 
the Federal Government to mandate a ``do not track'' solution 
that prevents people from being tracked by the multiple devices 
that they use to access the Internet, yes or no? Starting with 
you Ms. Lawler.
    Ms. Lawler. We don't believe that it makes sense for the 
government to mandate a ``do not track'' approach. We think it 
needs to evolve in terms of tools and technology.
    Mr. Hintze. We agree with the comments of Ms. Lawler. The 
FTC's done a good job of encouraging industry to move forward, 
but the industry has responded in an active way.
    Mr. Meyer. Legislative mandates for technology we don't 
think are the right approach, especially because it would 
extinguish a very vibrant competitive entrepreneurial market 
that provides these tools today that continue to evolve and 
compete with each other.
    Ms. Woolley. People need education. They need to know what 
is going on. They need to be make their own choices.
    Mr. Acquisti. It may not be the ideal solution, but it is 
better than no solution
    Ms. Dixon. We do support ``do not track'' legislation.
    Mr. Dingell. I note I am out of time, Madam Chair.
    Mrs. Bono Mack. The chair recognizes Mr. Olson for 5 
    Mr. Olson. I thank the chairwoman.
    And I want to welcome the witnesses and thank you for 
giving us your time and expertise. And just for the record, my 
neighbors' kids were not out in the lobby early this morning. 
They are still back home in Texas, as far as I can tell.
    And my first set of questions are going to be for you, Ms. 
Woolley, and I want to follow up on the line of questions from 
Ms. Blackburn from Tennessee about the economics of privacy. 
And I am familiar with the Digital Advertising Alliance's 
effort to develop the advertising icon so proudly displayed 
over here, which provides consumers with notice and choice 
about ads being delivered to them through behavioral targeting.
    Many of the big companies have adopted the icon, but as you 
know, small business drives job creation in our economy. So can 
you elaborate more on how you have made the icon available to 
our small businesses for free?
    Ms. Woolley. Thank you for raising that. It is actually a 
great story. We have made the icon available for free. If you 
have less than $2 million of revenue that is derived from 
online behavioral advertising and you are a small business, you 
can get the icon for free. We also have a program with one of 
the ad networks that deploys the icon on small business Web 
    And the thing that that does is it enables those small 
businesses to get revenue from the ad networks because their 
ads are--they are now targeted ads. So it enables small 
businesses not only to get revenue from the businesses that 
they are in but from the advertising world as well. So it is 
actually a great program.
    Mr. Olson. That is my feeling as well.
    Would you say that the icon provides a competitive 
advantage to companies that adopt it? To put it another way, 
are companies competing for business based on privacy features?
    Ms. Woolley. Actually, that is very interesting. When we 
launched the icon, we did not anticipate it being a trust seal 
of sorts. We thought that it was really just a consumer notice 
and choice mechanism, but it has actually wound up being a 
trust seal. And companies are competing based on the fact that 
this is a symbol that consumers can see; they know, they know 
that there are principles and enforcement behind it, and they 
wind up trusting that site much more than they would have 
    Mr. Olson. So it actually is becoming competitive and 
    Ms. Woolley. Absolutely.
    Mr. Olson. Finally, in your testimony, you mentioned one of 
the major benefits of industry self-regulation is its ability 
to respond quickly to changes in technology and business 
practices. And some have raised concern that data collected for 
advertising purposes could be hypothetically used as a basis 
for health insurance or credit eligibility decisions, but we 
don't have any actual examples or cases of this happening. But 
DAA is still going to address these concerns and help to expand 
your guidelines to clarify these kinds of practices that would 
be prohibited. Can you elaborate more on that initiative?
    Ms. Woolley. Yes, sir. You actually have stolen a little 
bit of our thunder, because in a couple of weeks, we are going 
to be making the announcements that all of the companies that 
comply with the DAA program will be prohibited from making 
eligibility decisions, any kinds of eligibility decisions based 
on data that is advertising and marketing data.
    So I know that the chairman of the Federal Trade Commission 
is fond of saying, ``If you buy a deep fryer online, then you 
will be denied health insurance.'' And we want to make it 
abundantly clear that that kind of decision is not acceptable. 
It is not part of the program. If you do that and you are part 
of the program, you will be thrown out of the program and 
referred to the FTC.
    Mr. Olson. I didn't mean to steel your thunder. That is not 
what I intended to do.
    This is a final question for all witnesses. Because of my 
time, I will probably have to make it yes or no questions.
    It is my understanding that the FTC has received a very 
wide range of comments concerning consumer attitudes and 
behavior when it comes to privacy. My interpretation of that 
wide range in comments: There is no clear consensus. Some 
consumers feel more strongly than others about online 
    And so my question for all of you, starting to the left and 
work to the right there, is there any hard data that you are 
aware of that demonstrates the level of discomfort or the 
percentage of consumers who are willing to forego the benefits 
of free content online in order to avoid being tracked, yes or 
no? Starting at the end with you, Ms. Lawler.
    Ms. Lawler. I don't have any specific information from our 
consumer or customer studies that would indicate that 
particular type of action.
    Mr. Hintze. It is hard to interpret a lot of the studies 
out there because, as Dr. Acquisti pointed out, there is a 
discrepancy between what people say and what they do. So you 
can find a lot of studies that say people are very concerned 
about privacy, and I believe there is something behind that.
    But in terms of the tradeoffs, that is harder to quantify.
    Mr. Meyer. We haven't seen that research. It is the same 
juxtaposition between what consumers say and what they do. But 
it is something we are actually looking at Evidon right now.
    Ms. Woolley. People vote with their feet or with their 
pocketbooks. And I think it is accurate to say that people are 
concerned about privacy, because they are. And I think it is 
also accurate to say that people are not afraid to use 
technology, and they are not afraid to use the Internet. Sales 
on the Internet have gone up exponentially in the last 3 years, 
and new devices come out. People love them. They buy them. They 
down load apps. They are very willing to adopt all of these new 
things as they come out. They love them.
    And we are very mindful of the fact that as an industry, we 
are the ones providing all of these great and wonderful and 
engaging things to people, but we have to take into 
consideration their desire for privacy. And that is the main 
reason that we have created this entire program.
    Mr. Olson. You have met my 14-year-old daughter.
    Mrs. Bono Mack. The gentleman's time has expired. And there 
will be a an opportunity for a second round, but there are 
still some other members needing to ask questions.
    The chair recognizes Mr. Stearns for his 5 minutes.
    Mr. Stearns. Thank you, Madam Chair, and let me compliment 
you. This is a great hearing, and I am glad to have all of 
these witnesses here.
    Ms. Woolley, let me say that I think that your logo and 
what you are doing is terrific, and I think it goes a long way 
toward this self-regulatory behavior and program. And we have 
just got to educate the consumers what it means when they see 
your logo. And hitting that logo, when I look at your slides, 
it starts to move into a little complication. And had you 
thought about perhaps even simplifying it even further, or do 
you think you are at the point where it is pretty well 
understood by consumers?
    Ms. Woolley. I don't think it is at the point where it is 
understood by consumers. We are actually later in the fall 
going to be launching an education campaign just to get at that 
point. We really hope that over time consumers will look at 
this symbol and know exactly what it means, kind of the way 
consumers look at the recycling symbol. Fifteen years ago, 
nobody really knew what the recycling symbol was and how they 
do it.
    Mr. Stearns. This Good Housekeeping Seal, which everybody 
recognizes, is universally accepted.
    Ms. Woolley. Exactly.
    To answer your question about whether the program is where 
it needs to be, we launched this program a year ago, and we are 
constantly looking for suggestions about evolving the program, 
making it more consumer-friendly and making it do really what 
all of you want it to do. So I welcome that input.
    Mr. Stearns. When I look through your slides, it is almost 
as a consumer, I just want one big button, can I opt out, and 
that is it, and it is done.
    Ms. Woolley. There are two ways that you can get to our 
opt-out. You can get to it from the icon that is on ads. The 
other way that you can get to it directly is if you go to 
www.aboutads.info, and if you go to that site, in the middle of 
that site is a huge check mark, and it says, for consumers, if 
you check on it, you can opt-out right there.
    Mr. Stearns. That opt-out, when you do that, does that 
apply to all of your companies, or does i apply to----
    Ms. Woolley. The first thing that happens is you will see 
your computer churning away, and it will tell you the ad 
networks that are operating on your browser on that computer. 
And you can opt-out of all of them if you want to. Immediately 
behind it is a screen that tells you all of the ad networks 
that exist, and you can opt-out of all of those if you want.
    Mr. Stearns. I think it is a credit to what you are doing. 
When you see the European Union's privacy policy and then you 
see a lot of Latin America and a lot of Asian American 
countries have stopped--India is starting to include a privacy 
policy adopted after the European Union, we are almost going to 
be sitting here with a self-regulatory type of operation 
compared with everybody else.
    Do you feel there is any Federal baseline legislation that 
is needed at all for privacy?
    Ms. Woolley. Not at this time. We have got some great 
privacy laws in the area of HIPAA and Gramm-Leach-Bliley----
    Mr. Stearns. Dealing with financial and health care----
    Ms. Woolley. Exactly.
    Mr. Stearns. So you don't think there is any other area 
that is as sensitive?
    Ms. Woolley. I don't.
    Mr. Stearns. Do you think that there is any need for 
Federal baseline legislation for any aspect of personal privacy 
on the Internet? Just yes or no.
    Ms. Lawler. I need to say more than yes.
    Mr. Stearns. Just yes or no. If you have to check off 
whether we need Federal baseline legislation for any aspect of 
personal privacy on the Internet?
    Ms. Lawler. As a company that is already regulated by some 
of the laws just mentioned, if there were a Federal baseline 
approach, we would want to see something that is principle-
based. So we think that there's a potential for an appropriate 
baseline in place----
    Mr. Stearns. I have a bill H.R. 1528. It is a privacy bill 
that Mr. Matheson and I both dropped.
    Ms. Lawler. Yes. I have looked at that.
    Mr. Stearns. Do you think there is anything in there that 
you think should be needed? You won't offend me if you say no. 
Doesn't bother me at all. I have nothing tied to my 
    Ms. Lawler. I think there are some things there that are 
    Mr. Stearns. Let me go down and ask you if you think there 
is any Federal baseline legislation, Yes or no?
    Mr. Hintze. Yes, we have been on record for a number of 
    Mr. Stearns. I know. I thought you had.
    Mr. Meyer. We don't support any new baseline legislation, 
but having read your bill, the piece that we do like is the 
provision for safe harbor for self--existing self-regulatory.
    Mr. Stearns. Using the Federal Trade Commission.
    Ms. Woolley. Ditto with that.
    Mr. Acquisti. Yes, we do. Self-regulatory solutions tend to 
fail under pressure, and the recent studies have shown that 
there is a frequent non-compliance with NAA and the DAA 
initiatives among the top 100 Web sites----
    Mr. Stearns. So your answer is yes, there needs to be some 
    Mr. Acquisti. Yes.
    Mr. Stearns. Ms. Dixon, I assume you are a strong yes.
    Ms. Dixon. Yes, and we would still like to see reforms of 
existing self-regulatory programs to include consumers in other 
    Mr. Stearns. Let me ask this last question and just ask one 
person, so it won't take too much time. What benchmarks are 
needed for self-regulation? Could you say from your experience 
what benchmarks are needed, since you represent the digital 
    Ms. Woolley. Thank you. I think the right benchmark is not 
how many people opt-out. I think the right benchmark is how 
many people are seeing icons, and do they know what it means? 
So I think education is the right measure.
    Mrs. Bono Mack. Thank the gentleman.
    The chair recognizes Dr. Cassidy for 5 minutes.
    Mr. Cassidy. Thank you.
    I am never quite sure I understand this issue as much as I 
try and understand it.
    Ms. Lawler, did I hear you say that only 0.05 percent of 
people actually opt out?
    Ms. Lawler. Here is what I was saying is, we were talking 
about the opt-out rates for email marketing, which is different 
than the discussion that the majority has focused on today 
around online behavioral advertising. So what I was actually 
listing was kind of a range of industry standard, which is 0.1 
to 0.05. That is a different kind of data than what we are 
talking about with opt-out for behavioral advertising.
    Mr. Cassidy. Ms. Woolley, Ms. Dixon raises some troubling 
things in their testimony. She speaks of how AOL once released 
some data sets; New York Times was able to track backward from 
these compressed data sets, supposedly disjointed, to find out 
where somebody lived. Now, do current self-regulating processes 
prevent that from happening again? Because that would certainly 
spook me if the New York Times was knocking on my door hey, 
Bill, what is happening? So you see my question?
    Ms. Woolley. I am not familiar with the point that was 
    Mr. Cassidy. Ms. Dixon, will you mention to her what your 
testimony said?
    Ms. Dixon. In the testimony, I was talking about that we 
needed a larger vocabulary when we are talking about online 
privacy. And I mentioned the AOL data breach in 2006. What 
happened is researchers at the company released data sets that 
were anonymized information about users, supposedly, and after 
it was released, a New York Times reporter went through and was 
easily able to look at little bits and pieces of scattered 
information that consumers had typed into search engines, and 
they identified people.
    Mr. Cassidy. So that said, that is troubling.
    Ms. Woolley. Yes, it is troubling. And the whole issue of 
data breach is very troubling. And I think that we need to be 
very careful about separating out privacy issues from data 
breaches. And the data breach issues I think require some 
significant action by Congress.
    Mr. Cassidy. Ms. Dixon, would that answer satisfy you?
    Ms. Dixon. I think that what happened at AOL was part of an 
environment where there is not a clear idea of what privacy 
benchmarks and standards there are.
    Mr. Cassidy. Yes, but that was a data breach?
    Ms. Dixon. I am not so sure that it was a data breach. I 
think that it can't easily be defined that way. Because when 
consumers type their search queriesinto that search engine, 
they relied on that AOL privacy policy that says, hey, we are 
going to do X, Y, and Z.
    Mr. Cassidy. Let me move on.
    Mr. Hintze, when I log on to MSN and I put in my user ID 
and then I hit in private browsing, does MSN or Bing still 
track me, even though Fox Sports may not or----
    Mr. Hintze. The in private browsing feature in our Internet 
Explorer browser blocks third parties who are present on the 
Web site you have gone to. But when you have gone to a Web 
site--say you have gone to MSN. In that case, MSN would be the 
first party. That is the company, that is the Web site you 
chose to interact with. So it doesn't block the connection to 
that first party.
    Mr. Cassidy. So does MSN then track me across the 
    Mr. Hintze. No. The in private browsing, it prevents 
anybody who, other than the site you have chosen to go to--so 
when you go to MSN, MSN knows you are there. When you go to 
Amazon, Amazon knows you are there. But if there were a common 
third party, they would not be able to track you across those 
two sites because you blocked them.
    Mr. Cassidy. So for my home page for MSN, I have a Web site 
from Home Depot. Home Depot would not know, but MSN still 
knows. Is that correct?
    Mr. Hintze. Correct. If you type www.MSN.com into your Web 
    Mr. Cassidy. Now I think I understand now how data is 
anonymized and theoretically, if you will, I am protected, but 
I gather that if you are MSN, Yahoo, or Google and I log in, 
that is not anonymous. That is actually me. Now, so, again, I 
am trying to understand this. I apologize if I sound stupid, 
but you can take, unlike everybody else who is anonymous, you 
actually know it is me. Now to what degree can you collate that 
with other information from other third parties?
    Mr. Hintze. You are correct that when you sign into a site 
you have self-identified yourself to them. You have said, hey, 
it is me; you have a billing relationship with them, for 
example. There are different methods used within the industry 
to anonymize data. Some are stronger than others.
    Mr. Cassidy. Does MSN anonymize my data once I have signed 
in, or do they keep it much as apparently AOL did, as a dataset 
which could be leaked and which could then be tracked back to 
my home address?
    Mr. Hintze. For search data, we store search queries, for 
our Bing search engine, we store search queries in association 
with a unique identifier which we put technical controls, 
including one-way cryptographic hashing, to prevent that data 
from being associated with identifiable data that you may have 
provided to another one of our sites.
    So, for example, if you had a Hotmail account and you had 
given us your name and your city, we would have that in one 
database, and we put in measures to make sure that when you put 
in your search query, that data is not associated, it is in 
different buckets.
    Mr. Cassidy. I am out of time, but I may hang for the 
second round. Thank you, I yield back.
    Mrs. Bono Mack. I thank the gentleman, and a few of us have 
stuck around for a second round. So I am going to begin with 5 
minutes for myself, and the question--I don't know if it would 
be better for Mr. Hintze or Mr. Meyer or who. Anybody can take 
a crack at this. Something that just popped into my brain was 
deep packet inspection, and we haven't talked about that at all 
today. But my example is the other day I received an email from 
a friend of 40 years ago who I did gymnastics with. The message 
said ``gymnastics'' somewhere in there, and sure enough, for 
the first time ever, I received a bunch of ads about buying 
tumbling mats. I never, ever have gone online to look for 
tumbling mats.
    Deep packet inspection, is it a part of your thinking here, 
or is it as troubling to you as that glaring example was to me?
    Mr. Hintze. I will just briefly respond and then let 
others. We don't engage in it. It is not how we run our ad 
network. Even within our own email online service Hotmail, we 
do not base advertising based on the content of your email. 
Other companies do that; we do not.
    Mrs. Bono Mack. Have you supported in the baseline 
legislation, you have said you supported in the past, something 
    Mr. Hintze. We have supported Federal baseline privacy 
legislation. Like others on the panel, we think it should work 
in conjunction with self-regulatory initiatives with safe-
harbor provisions, but it is something we have supported.
    Mrs. Bono Mack. And DPI, would you support throwing that in 
there, then? Deep packet inspection, would you support putting 
that in there?
    Mr. Hintze. You know, I think that one of the challenges 
with legislation is that when you get into particular 
technologies and try to ban technologies or methods, that can 
have unintended consequences.
    Mrs. Bono Mack. Thank you.
    Mr. Hintze. You talk about deep packet inspection, you talk 
about supercookies, there are certainly uses where we think 
those methodologies are inappropriate and invasive and not 
consistent with consumer expectations or choices they have 
made. But one can imagine that those kinds of technologies 
would be put to very beneficial uses, and so I think we have to 
be very careful about trying to regulate specific technologies.
    Mrs. Bono Mack. Thank you. Mr. Meyer?
    Mr. Meyer. I agree with Mr. Hintze. I think that Evidon's 
purview doesn't expand out into deep packet inspection, but our 
opinion is similar to the opinion on supercookies, that right 
now we don't see it as a good use in online marketing, but 
legislation carries with it a lot of risks around legislating a 
technology when things are evolving this quickly.
    Mrs. Bono Mack. Thank you. I really enjoyed Mr. Guthrie's 
questioning earlier. He really got to the crux of the whole 
matter, what does this mean.
    Miss Dixon, you took a crack at the answer, but it is the 
reputational harm that we are all concerned about, and then I 
am also concerned about a bridge too far. When does 
reputational harm then translate into physical harm? And those 
are the questions that I think we need to grapple with as 
policymakers. But I have also--and I keep going back to how the 
content, we had, you know, P2P, we had Kazaa, and Napster, and 
some things come up, and then i-Tunes came on the scene to deal 
with peer-to-peer, and now we are back to like a Spotify method 
where content is all free again. You can download 3,000 songs 
for free.
    So it is still evolving, and the business models are 
evolving. But really, me perhaps jumping ahead here to Intuit. 
Reputational harm for consumers is one thing, but I know that 
Intuit, the reputational harm that could happen to a company 
should they breach consumers' confidence is also something 
worth considering.
    And I think, Ms. Woolley and Ms. Lawler, if you would like 
to take the next minute and 45 to talk about your version of 
what would happen to your company if you lost consumer 
confidence by breaching what consumers believe you do to 
protect them.
    Ms. Lawler. When we conducted our customer research to 
understand their attitudes about privacy and how data was used, 
our customers were very clear that as long as we were open and 
honest and clear with them about what we were doing and giving 
them choices, that they would trust us, continue to trust us. 
So they said things like, ``I will continue to use your 
products because of the data stewardship principles that you 
are showing us; I feel safer in an unsafe world.''
    Conversely, what we saw, because we did quantitative 
research where we got a lot of verbatims that I have just 
mentioned, but we also did qualitative studies where we talked 
one on one and in small groups, and in those sessions, I think 
our customers--and I think it is a proxy just for consumers at 
large--when you are dealing with unique data about me that is 
sensitive to my life or my business, I want control, I want to 
know what is going on, and if you screw that up, I am certainly 
going to consider going somewhere else.
    And to the point someone made earlier, consumers make 
choices with their feet and with their wallets. They also make 
choices in the online world essentially with their fingers and 
eyeballs. So that is why being as open and clear and 
transparent, starting with this idea that it is the customers' 
data, not ours, and putting them as much in control as 
possible, is just critical to our success. It enables us to 
actually innovate and use their data to benefit them in ways 
that improve their lives.
    Mrs. Bono Mack. Thank you. Ms. Woolley, if you would like 
    Ms. Woolley. Thank you. One of the things that is great 
about the DAA program is that in order to get the principles in 
the first place, thousands of companies participated in that 
process, and the six trade associations that developed it also 
represent thousands of companies, so it really is a consensus-
based program. And the reason that so many companies came to 
the program and came to the table was because they are all 
intent on doing the right thing. Obviously there are outliers 
out there who may or may not be as interested in doing the 
right thing, but the goal of the program is to get as many 
companies into the program as possible, and so the issue of 
reputational harm is clearly front and center for all of them.
    Mrs. Bono Mack. Thank you, and my time has expired. And I 
recognize Mr. Butterfield for 5 minutes.
    Mr. Butterfield. Thank you. Social networking sites like 
Facebook have made it possible for Internet users to share the 
details of their lives. The things users share can include 
seemingly mundane and harmless things like where they were 
born, or head shots and picture profiles. It can also include 
more intimate and personal details, like how they are feeling 
physically or mentally, their relationships, their political 
leanings, or even their work history or other affiliations. 
Some choose to put all of this out there for the whole wide 
world to see--I am not one of those, but some do--while some 
choose to make only the barest of details available to the 
world and selectively share based on their preferences.
    Professor, in your testimony you discuss briefly a couple 
of studies you have contributed that support the view that 
consumers' ability to make rational and fully informed 
decisions about their privacy preferences are constrained, 
constrained both by our limited ability to process information 
available to us, and advances in technology whose implications 
can't be understood or predicted by consumers. Specifically, 
you mentioned a study in which you were able to identify 
individuals and infer personal information about them using 
facial recognition technology in photos they had posted online 
on sites like Facebook. That is absolutely incredible.
    Can you please discuss this study a bit more, briefly 
describe what you did, what bits of information you used, how 
easily available it was to you, and what further information 
you were able to infer?
    Mr. Acquisti. Certainly. Indeed, our study was about 
finding out what happens when you combine publicly available 
information with off-the-shelf technology such as face 
recognition and cloud computing, and you put them together and 
you try to identify individuals online and offline and then 
infer more sensitive information. What we did, we started from 
images of faces of people that I could call them anonymous in 
the sense that we didn't have a name when we started the 
experiment. These images either came from online environments 
such as dating sites or from the State, students on the CMU 
campus. We used face recognition and cloud computing to compare 
these images to images we had downloaded from publicly 
available data, profiles on popular social networking sites, 
and when we found matches between a face in the first group and 
a face in the second group, we could then infer 
probabilistically the name of the person, up until then 
anonymous. With the name, we could then search for personal 
demographic information.
    For instance, from Facebook profiles we can find often the 
hometown where the person was born and the date of birth, and 
then with the hometown and the date of birth, using an 
algorithm we developed 2 years ago, we ended up predicting the 
Social Security number. So the sequence is start from a face, 
find a name online associated with the face, find publicly 
available information, not sensitive, but demographics for 
instance for the person, and with that information infer 
something more sensitive. It is a process of data accretion 
which shows the challenges we face in protecting privacy.
    Mr. Butterfield. You mentioned Social Security numbers, and 
that is somewhat intriguing. Are you saying that you are able 
to possibly predict Social Security numbers based on simple 
demographic data put up by individuals on Facebook?
    Mr. Acquisti. Yes. When I say ``predict,'' I stress that I 
am talking about a probabilistic prediction, not deterministic. 
What I mean is that a Social Security number has nine digits, 
and we would not be able to predict with a single attempt all 
nine digits at the same time, so our degree of accuracy 
changed, depending on whether we consider only the first five 
digits or all nine. But the stories that--and we showed this 2 
years ago, because data about Social Security numbers is 
already publicly available--it is called the so-called death 
master file. It is a public database of all Social Security 
numbers of people who are dead, and because we have so much 
demographic data for people who are alive, we can interpolate, 
combine the two datasets and end up predictions as a sense for 
alive individuals.
    Mr. Butterfield. Let me yield to the chairman.
    Mrs. Bono Mack. I appreciate that very much. I think this 
is an important point that needs serious clarification. You can 
find all of that data on any public figure right now by going 
to a bio. You can open a book, somebody has written their life 
story. You don't need to create an algorithm, you can just do 
    Why aren't people just creating, I mean other than creating 
the Social Security number, but you are trying to protect 
people from--for example, any Member of Congress, all that data 
is out there. So how is it different?
    Mr. Acquisti. So, indeed, there are two points to make 
here, one specific to as a sense. In recent years the 
regulatory approach has been towards making Social Security 
numbers less available, because we know they are so sensitive. 
And in a way that is well intended, a good meaning; but the 
challenge we show with our results is that even if you make 
Social Security numbers less available in public documents, 
they can still be predicted from otherwise publicly available 
    Mr. Butterfield. Thank you.
    Mrs. Bono Mack. Thank you so much, Mr. Butterfield.
    Mr. Butterfield. Uh-huh.
    Mrs. Bono Mack. But your point that you began with, I think 
facial recognition technology is troubling for everybody, but 
your point was you are not critical of Social Security numbers. 
You are talking about how easy it is to search because, you 
know, we could be taking a picture of any of you and suddenly 
by tomorrow have your Social Security number.
    Mr. Acquisti. This is absolutely correct.
    Mrs. Bono Mack. This is a privacy debate. On the online 
world we are asking for more than perhaps has been out there 
for years, and these things aren't happening. So I just want to 
point that out, and I have overexhausted his time, so I need 
to--oK, yes, if you can respond briefly.
    Mr. Acquisti. The Social Security number prediction is just 
an example what can be done. The story we were telling with 
this recent study is that we are now close to a point where you 
can start from an anonymous face in the street and predict 
sensitive, not publicly available, but sensitive information 
about the person.
    Mrs. Bono Mack. I thank the panel and the gentleman for 
yielding to me, and I am happy to now recognize Mr. Stearns for 
5 minutes.
    Mr. Stearns. Thank you, Madam Chair. We hear from consumers 
and from researchers like the professor today, and even from 
Intuit's own research, that privacy policies are too 
complicated and consumers don't bother to read them. And 
myself, if it is one or two pages I don't go further. And so I 
think most consumers just don't take the time. And then, of 
course, if the privacy is on the thin side and they are just--
such that they don't advocate enough, enough protection.
    So I guess, how do we bridge the gap and provide full 
disclosure without alienating the average consumer who is not a 
privacy professional? It seems to me that is about where we 
are. If we are talking about self-regulatory incentives, then 
you have got to have some kind of policy which bridges this gap 
and provides the information without confusing the consumer. So 
I thought I would just go from my left to my right, and maybe 
some ideas of how we could do this so that consumers are 
educated, for one; and two, that the privacies are not 
complicated and maybe design work or something like that, some 
    Ms. Lawler. We are experimenting with different types of 
what I would call explanations to customers, and that is really 
out of our research--and some of our early findings suggest 
similar to what we have heard a little bit about today, a 
simple, plain English explanation in context. So you can't 
offer big blanket opt-in or opt-out or whatever kind of choice 
at the beginning of something where it is not relevant to me. I 
don't understand it. Customers have been very clear about that. 
And I think there are probably other studies that validate 
that, but in context.
    So we are actually running tests right now. We don't have 
the data yet. We would be happy to come back and share that at 
a future time.
    Mr. Stearns. OK.
    Ms. Lawler. One of the other things that we did that I 
think--just a couple of other quick thoughts, sir--is if we 
stopped thinking about privacy policies and privacy statements 
and put it in this framework and this idea that is plain, 
simple, short explanations, you have to have a policy 
somewhere, but really what consumers want is something that is 
simple, easy to understand, real-time. And if companies haven't 
done it, what I would suggest they do, which we did recently 
and have made improvements significantly, is run your policy 
statements, your explanations, through a grade-level analyzer. 
So we did that, and we have simplified our language so that it 
was closer to a 9th grade level rather than where we started a 
couple years ago at a 13th grade level.
    Mr. Stearns. OK. Let me go through the panel here. I have 
only got about 2-\1/2\ minutes left.
    Mr. Hintze. Yes. To cut this short, I agree with everything 
Ms. Lawler said. I think that in our experience the challenge 
is to get information in front of people when you are most 
likely to capture their eyeballs and their attention, and 
sometimes that means at the point of a decision making, when 
they are making a particular decision. Sometimes that can be 
too disruptive because they are so anxious to get the thing 
done that they are trying to get done, that if you put 
something in front of them, they are just going to hit 
``cancel'' or ``yes'' or whatever the default is. So sometimes 
it is at the time you are installing a product. Sometimes it 
really sort of varies and you get there with a little bit of 
trial and error.
    Mr. Stearns. But the point at which you get their attention 
is what you are saying.
    Mr. Hintze. Yes, yes.
    Mr. Stearns. Mr. Meyer.
    Mr. Meyer. That is our business to figure this out, and the 
key thing I would add to the discussion is----
    Mr. Stearns. Why, Mr. Meyer, don't you have privacy with a 
video, just a quick--I never see anybody have a video for 
    Mr. Meyer. Some companies, some of our clients, do have 
videos in their privacy policy.
    Mr. Stearns. Somebody would say do this, do that.
    Mr. Meyer. Yes, it all depends on the segment. It is very 
hard to know which type of user is showing up in which 
particular experience, and the key is to create a layered 
experience so that it can stand up to the scrutiny of, you 
know, privacy advocates and academics, and as well as be simple 
enough for someone to get through it in a few clicks. And that 
is part of the reason we did this partnership with Akamai, to 
get the first layer as close to the point of engagement as 
possible, and then allow consumers who want more detailed 
information to dig through it, but not force them to read 
through a whole complex policy.
    Mr. Stearns. Gotcha. Ms. Woolley.
    Ms. Woolley. The goal that you mentioned is exactly the 
goal of the program, the advertising option icon program. It is 
in one or two clicks a simple explanation about what is going 
on, not----
    Mr. Stearns. Have you thought about using video on it?
    Ms. Woolley [continuing]. A deep privacy policy, and also 
you can opt out.
    Mr. Stearns. Instead of a narrative, do you think a video 
would be better?
    Ms. Woolley. There is not a video, but good idea. I mean, 
it is something we may try and do.
    Mr. Stearns. Because you see, across these Web sites, the 
ones who are most successful have the videos instead of the 
narrative. Anyway, Professor?
    Mr. Acquisti. Two solutions which need to complement each 
other; one is standardize the starting line of privacy 
policies, which are common in form across Web sites. This 
decreases the cognitive costs for the consumer. And the second, 
a baseline level of protection further through regulation.
    Mr. Stearns. Would that come from that baseline from the 
Federal Trade Commission? Where would that baseline come from?
    Mr. Acquisti. For instance, from the Federal Trade 
    Mr. Stearns. Oh, OK. Ms. Dixon?
    Ms. Dixon. I agree with Professor Acquisti's remarks. I 
would just add one thing. We are talking about improving self-
regulation of consumers. I think we ought to hear from the 
consumers, and the consumers ought to be part of that self-
regulatory process and have a permanent and defined role in 
that process so they can give us direct feedback.
    Mr. Stearns. Good. All right. Thank you, Madam Chair.
    Mrs. Bono Mack. Thank you, Mr. Stearns. The chair is happy 
to recognize Dr. Cassidy for 5 minutes.
    Mr. Cassidy. Mr. Hintze, OK, somebody--you have a phone, 
right? You have a phone system? So Microsoft does. If I log on 
my phone, I register my phone, I pull it out of the box and I 
register it, it says hey, I am Bill Cassidy, I am da-da-da, and 
I also again have MSN. You spoke about this kind of firewall, 
if you will, between my Hotmail account and my MSN activities. 
But what if Apple or Google or Yahoo! or you--I have a phone 
and either I have the phone which your company provides, or I 
am using the operating system that your company provides, or I 
am plugged into my browser on the phone; is that data 
correlated with my desktop browsing?
    Mr. Hintze. No, and----
    Mr. Cassidy. And do you speak just for Microsoft or do you 
speak for an industry standard?
    Mr. Hintze. I am speaking for Microsoft. I am speaking for 
Microsoft. Well, it depends. It depends on the scenario you are 
talking about. If you log in to your Hotmail account on a PC 
and then you log into your Hotmail account on your phone, it is 
the same account; that data is connected on the back end. The 
problem is there are many different scenarios we can go 
    If you are using a location-based service, where we as the 
operating service on the phone is providing this location 
service, that location data comes up without any identifying 
information. It comes up only so that it can send back location 
information so that an application can take advantage of that. 
And then on our back end, we don't store any unique IDs at all 
associated with the hardware or a user, and so, you know, it 
really depends on the scenario. In a logged-in scenario is the 
one scenario where, yes, there would be a linkage across the PC 
    Mr. Cassidy. Now, would this data be, could this data be or 
is this data, when it is connected, is it collated, correlated, 
da-da-da dated, in order to further target me in a more 
sophisticated fashion?
    Mr. Hintze. We are just moving into mobile ads, and so in 
the future I think the answer will be yes. But, again, we would 
do that in a way that takes into account our own privacy 
standards, the standards that are being developed by the self-
regulatory initiatives, et cetera. So yes, but people will have 
choices about that.
    Mr. Cassidy. OK. Ms. Dixon, what are your thoughts about 
that, because you seem to kind of come from the most sort of 
we-have-to-be-concerned perspective?
    Ms. Dixon. Yes, the tethered applications, mobile phones 
that are--there is certain hard encoding that Mike could tell 
you more about, that links that phone directly to a person's 
identity in different ways than Web browsing does. So when we 
are talking about linking ads to phone technologies, I think 
that we are entering a new arena. The self-regulatory regime in 
place for that is a code of conduct by the Mobile Marketing 
Association, and the codes are profoundly general. They are so 
general it is unbelievable, and they are not protective at all. 
So a great deal of work would have to be done to reform this 
space or to regulate the space in order to provide baseline 
consumer protection.
    Mr. Cassidy. Ms. Woolley, what are your thoughts about 
that? And, again, I am going to cut you off in a second because 
I have one more question for Mr. Hintze.
    Ms. Woolley. Thanks. We are in the process of developing a 
program, building up a program where this icon will migrate to 
ads that are served on mobile devices. So a consumer will be 
able to not only see an ad on a mobile device, but he or she 
will be able to see the icon and opt out on that mobile device. 
And those choices, as we develop that program, expand that 
program to a mobile device, those choices must be honored by 
everybody in the chain of delivering that ad on a mobile 
device, the same way that the choices have to be honored.
    Mr. Cassidy. So you agree with Ms. Dixon, but you feel as 
if that work, that hard work is being done, if you will?
    Ms. Woolley. Absolutely.
    Mr. Cassidy. OK. Now, Mr. Hintze, in your testimony, 
reference 19--reference, I should say comments--you say that 
even if responsible companies adopt strong practices and 
participate in self-regulatory initiatives, bad apples can 
spoil the whole bunch. Michael Jackson's redux. And government 
can play a role by setting baseline standards.
    Now, that is a little bit less libertarian than I think 
some of the others on the panel. So you do see a role for 
government setting baseline standards. Mr. Stearns has 
legislation which, frankly, I haven't read, but he referenced 
it earlier. Have you read it, and if so--if not, confess; but 
if so, what are your thoughts on it?
    Mr. Hintze. We have read it and we have been on record for 
I think about 6 years now of supporting baseline Federal 
privacy legislation, that again it would be principles-based, 
not technologies-based. It would have to be flexible and 
incorporate safe harbors for effective self-regulatory 
initiatives. But there are a lot of things in Mr. Stearns' bill 
that we are supportive of, and we are, you know, happy to work 
with this committee and your office, Mr. Stearns, on that as 
well, going forward.
    Mr. Cassidy. OK. I am out of time. I yield back, and I 
thank you.
    Mrs. Bono Mack. Thank the gentleman, and we would like to 
thank our panel very much for being with us today. You have 
been quite gracious with your time, and I look forward to 
working with all of you again as we get closer to making some 
important decisions about the best ways to protect the online 
privacy of American consumers.
    I thank Mr. Butterfield and all of the members and staff of 
this terrific subcommittee for their participation.
    This was the fourth in our series of online privacy 
hearings so far this year. As the bits and bytes begin to add 
up, I think that we are getting closer and closer to 
understanding what the American consumers really want with 
respect to online privacy.
    I remind members that they have 10 business days to submit 
statements and questions for the record and ask the witnesses 
to please respond promptly to any questions they receive.
    The hearing is now adjourned.
    [Whereupon, at 11:29 a.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]

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